February 12, 2025
Ams OSRAM’s MicroLED Setback: New Financial Impact Revealed
Mounting costs and market challenges weigh on Ams OSRAM’s microLED ambitions
Ams OSRAM’s latest earnings report, released yesterday, provides fresh details on the financial toll of its canceled microLED cornerstone project. The Austrian-German semiconductor company reported a total cost of €576 million ($599 million) related to adjusting its microLED strategy in fiscal year 2024, significantly impacting its bottom line.
In recent years, microLED technology has been gaining interest in the automotive and electronics industries due to its superior brightness, energy efficiency, and durability. Unlike OLED and LCD screens, MicroLEDs offer better visibility in bright conditions, last longer, and consume less power — making them an intruiging technology for vehicle displays, headlights, and infotainment systems. However, the technology faces challenges, including high production costs, complex manufacturing processes, and difficulties in scaling for mass production.
The latest Ams OSRAM write-down includes €490 million ($510 million) in impairment charges, primarily write-offs on assets and R&D investments, and €86 million ($90 million) in transformation costs associated with restructuring and reallocating resources. The company had initially expected even higher costs, but adjustments in Q4/24, including the reversal of €29 million ($30 million) in provisions related to the project, slightly mitigated the financial burden.
MicroLED’s Role and the Decision to Pull Back
Ams OSRAM had heavily invested in microLED technology for next-generation display applications, including augmented reality (AR), automotive, and premium consumer devices. However, despite the technology’s potential, it has faced commercialization challenges due to high production costs and slower-than-expected market adoption.
The February 2024 cancellation of the cornerstone project reflects these industry-wide difficulties. Other major players, including Apple and Samsung, are also grappling with the complexities of scaling microLED production profitably. Ams OSRAM’s decision marks a strategic pivot away from aggressive investment in microLEDs toward more immediately profitable semiconductor businesses.
Broader Financial Impact and Strategic Shift
Despite the microLED-related losses, Ams OSRAM returned to positive free cash flow (FCF) in 2024, reporting €12 million ($12.5 million), a sharp turnaround from the negative €332 million ($345 million) FCF in 2023. This recovery was driven by reduced capital expenditures and cost-cutting measures under the company’s "Re-establish the Base" (RtB) program, which aims to deliver €225 million ($234 million) in annual cost savings by 2026.
The company’s overall revenues in 2024 fell 5% year-over-year to €3.43 billion ($3.57 billion), with the semiconductor segment delivering approximately 7% growth after excluding discontinued non-core businesses. Ams OSRAM also secured €5 billion ($5.2 billion) in new semiconductor business contracts, reflecting continued demand for its core offerings.
Looking ahead to 2025, Ams OSRAM expects free cash flow to exceed €100 million ($104 million), signaling confidence in its cost reduction efforts and its pivot to core semiconductor products.
