ams
1.24
CHF
-6.98%
The management of the semiconductor manufacturer ams OSRAM is still in shock one day after the failure of a key project. Exactly how extensive the damage is remains unclear. The Austrian company was severely punished on the Swiss stock exchange.
“We were very surprised by the customer’s departure,” said ams OSRAM boss Aldo Kamper in a telephone conference on Thursday after the bad news was announced the evening before. As is usual in the industry, the company did not disclose who the major customer was. According to market observers, it seems to be an open secret that it is Apple.
Together with the customer, ams OSRAM pushed forward research into pixel-sized LEDs that could have been used for smartwatch displays, for example. The Austrian company built a factory in Malaysia specifically for this purpose. CEO Kamper estimated the investment expenditure for the project at around 1.3 billion euros.
Reasons in the dark
The technology should have been used by 2026. The CEO emphasized that he was caught on the wrong foot by the rejection. “From our point of view, there were no problems with the schedule,” added CFO Rainer Irle. But he couldn’t say what it looked like from the customer’s perspective.
An analyst from the financial group Oddo BHF speculated that there were few reasons why the customer (Apple) could have dropped out. Apple either considered the use of the technology to be too expensive or not a priority for the time horizon up to 2026. Or the US tech giant chose a different supplier, although it is also possible that Apple wanted to further develop the technology itself.
Growth drivers gone – huge write-off
What is clear, however, is that ams OSRAM has lost an important growth driver that cannot be replaced so quickly. However, CEO Kamper also emphasized that nothing serious had changed in the medium-term growth prospects. “Our other parts of the business are healthy,” he said.
Specifically, the company has only reduced its medium-term growth outlook relatively slightly to 6 to 8 percent (previously 6-10%). For the current year, the company expects a negative impact on operating profit (adj. EBIT) of 30 to 50 million euros.
It still remains unclear which parts of the factory in Malaysia and the production equipment can still be sold and which have to be written off. Management was also unable to say to what extent the research results already achieved could be capitalized on, for example by being used in other business areas.
However, according to an initial estimate, the company puts the depreciation at between 600 and 900 million euros. That would be around half to three quarters of the investment amount of 1.3 billion.
However, ams OSRAM continues to be in a solid financial position, including to finance future projects, as CFO Irle emphasized. However, management does not consider another project of this size in the area of micro-LED technology to be likely, at least in the short term. At least there is nothing concrete, says Irle. So far they have only concentrated on the project that has now collapsed. In general, however, there is definitely interest in the technology.
Price fall on the stock market
Analysts also saw Mirco-LED technology not as the main driver of medium-term sales, but as an important growth engine, as is the case at the British bank Barclays. Various analysts have downgraded the stock. The responsible analyst at Bank Vontobel wrote that he could no longer maintain his previous buy recommendation.
The share price also plummeted. At their lowest point on Thursday (today) the stocks lost a good 45 percent. At 2:12 p.m. they were still down almost 39 percent at 1.35 francs.
Shares in ams OSRAM plummeted on Thursday. The negative news from the semiconductor manufacturer continues. The analysts’ guild is disappointed.
Ultimately, ams OSRAM fell by 38.88 percent to 1,347 francs on the SIX.
For Bank Vontobel, the cancellation of a key project in the micro-LED strategy calls the future of the technology into question, according to an initial comment. However, this was one of the most important arguments for the previous purchase recommendation. Vontobel has therefore reduced its rating to “Hold”.
The French Oddo BHF SCA calls the child by its name regarding the cancellation. The sending of a notice by ams OSRAM means that this will certainly affect the group’s most important micro-LED customer, namely Apple. There are two possibilities as to why the project was canceled: Apple either considered the use of the technology to be too expensive or not a priority for the previously determined time horizon. Or Apple has chosen a different supplier, although it is also possible that Apple wants to further develop the technology itself.
As a consequence, Oddo BHF has also lowered the rating for ams OSRAM to “Underperform” from “Neutral” and the price target to 1.50 from 2.00 francs.
According to Barclays, the news is disappointing simply because ams OSRAM has recently made good progress with its refinancing plan. Although micro-LED technology is not the main driver of ams’ medium-term sales, it is still one of the growth engines.
Premstätten AT (awp)