AMS-Osram restructure hits 500 jobs, prompts fab exit

Business news | April 30, 2024

By Peter Clarke

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AMS-Osram AG (Premstaetten, Austria) has said 500 employees will be affected by a restructuring brought on by the previously announced cancellation of a microLED project.

The company is also seeking to exit a wafer fab in Malaysia that was being prepared for the project and has assigned a cost of €700 million to the project cancellation and restructuring.

That project was believed have been for the production of microLED displays for a forthcoming Apple smartwatch (see Apple blow makes AMS-Osram re-assess microLED strategy). The company said it is also restructuring its CMOS image sensors business as a part of a “re-establish-the-base” initiative. This includes the closure of a development site, although the company did not say where.

Since the announcement of the microLED displays cancellation AMS-Osram has initiated restructuring in both Germany and Malaysia, where it is seeking to off-load a 200mm wafer fab in Kulim. The company said it its pulling back to a minimum core development of microLED for use in automotive applications, such as pixelated forward lighting.

Job losses?

AMS-Osram said that in total more than 500 employees are affected by the restructuring but did not indicate job losses. “Some freed-up resources are reallocated to further strengthen the company’s market-leadership position in the automotive LED market, which is poised to soon become the single largest segment in the LED market according to latest market research,” the company said in an interim financial statement.

“In case a new lead customer commits in a timely manner to fund dedicated developments for specific applications, the company may continue a more substantial microLED development in an essentially cash flow and EBIT neutral manner,” the company added.

AMS-Osram said the cancellation of the project will cost it about €700 million. It has booked €632 million in 1Q24 with up to a further €70 million in costs expected through the rest of the year, including restructuring costs

The company is also trying to get out of a Sale-and-Lease-Back (SLB) contract for its Kulim wafer fab with the transfer of the fab to a new lessee as a high priority. When successful this will reduce long-term debt by about €400 million and eliminate the lease payments. No indication was given of who might be prepared to take on the wafer fab.

Financial performance

AMS-Osram provided this information alongside a discussion of its 1Q24 financial performance.

The company said it made adjusted EBITDA of €124 million on sales of €847 million, which were up 5 percent year-on-year. However, the adjusted EBITDA figure does not include microLED-related charges. The net result to IFRS (international financial reporting standards was a net loss of €710 million

AMS-Osram forecast 2Q24 revenues to experience a season decline pronounced by weakness in industrial and medical markets and to be between €770 million and €870 million.

“The industry dynamics in our LED markets have changed with the cancellation of the microLED cornerstone project. We adjust our strategy accordingly and continue to strengthen investments in the soon biggest LED market segment – automotive – which is to grow structurally for years to come. We intend to step out of the 8-inch factory and focus our microLED development on automotive needs for accelerating our path towards delivering truly positive free cash flow in 2025,” said Aldo Kamper, CEO of AMS-Osram, in the statement. “The promising mid-term growth prospects of all our core businesses that we are focusing on in automotive, industrial, medical, as well as selected consumer applications, are intact,” he added.