Apple blow makes AMS-Osram re-assess microLED strategy

Business news | March 4, 2024

By Peter Clarke

AMS-Osram Apple microLED

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AMS-Osram has said it has decided to re-assess its microLED strategy after a key project was cancelled a few days ago. The project is believed to have been for the Apple smartwatch.

Apple was expected to switch to a microLED display in its upcoming Apple Watch Ultra 3 whereas the established Apple Watch Ultra 2 uses a micro-OLED display. Some observers have pushed the advent of microLED display by as much as three years (see MicroLED displays delayed but coming in two to three years).

AMS-Osram said it is in discussions with the customer but has been ramping its ecosystem for large-scale volume production of microLED displays (see AMS-Osram ready to ramp microLED production in 2024). Ironically the cancellation of the key project is expected to improve cash flow at AMS-Osram within the next 24 months, due to reduced capital expenditure.

Cash impairment

The company said that as a result of the cancellation it would record non-cash impairment charges of between €600 million and €900 million in financial year 2024. The earnings before income tax (EBIT) would likely be lower by between €30 million and €50 million in FY2024 due to lower capitalization of R&D expenses and lower subsidies from government funding schemes.

AMS-Osram has been set to receive a €300 million subsidy from European taxpayers to help it build out manufacturing for microLED displays for its lead customer (see AMS-Osram set to get €300 million IPCEI subsidy).

The company said it will reconsider the use of its assets, particularly a 200mm wafer fab for making LEDs in Kulim, Malaysia. The company said it will consider additional cost improvements to lessen the impact.

The company said it now expects to grow revenues at a compound annual growth rate of between 6 and 8 percent in the mid-term. It said it sees unchanged momentum in design-wins in its core businesses of automotive, industrial and medical.

Late in 2023 Yole said that the adoption of microLED was being hampered as a lack of volume keeping prices high and helping the incumbent technology micro-OLED keep its design slots. The adoption of microLED by Apple in 2024 was expected to fire the starting gun on a global race to use the technology in small displays and to scale it up to large displays such as those on tablet computers.