Did someone say ‘supply chain woes’? ams Osram joins the chorus

Nov. 2, 2021
Sales were up in the third quarter, but clogged and delayed logistics dampen the outlook.

Echoing a refrain currently heard across many industries, ams Osram today said that supply chain problems are clouding its financial outlook, as it reported year-to-year revenue growth of 6% and flat profits for the third quarter.

The Austrian sensor and LED maker also outlined plans for consolidating manufacturing in Kulim, Malaysia and in Premstaetten, Austria via expansion at both locations and possibly paring back at others.

Ams Osram is the Premstaetten-based entity formed by ams’ takeover of Munich-based Osram, a company that was roughly four times ams’ size when the acquisition saga began over two years ago.

Since completing the acquisition in July 2020, and subsequently strengthening control last March, ams has been divesting much of Osram’s IoT lighting business.

It has been emphasizing Osram’s chip level expertise and leveraging Osram’s connections in industrial markets — especially in automotive — to expand ams beyond its traditional heavy reliance on the consumer smartphone market including Apple. In chips, the company sells sensors, LEDs, lasers, and other component across many sectors including mobile phones, computing, automotive, health and medical, wearables, smart homes, and others. It sells illumination to certain markets such as automotive, horticulture, and architectural façades.

Sales increased 6% in the third quarter ended Sept. 30, to $1.52 billion, from $1.44B in the same quarter a year ago. Ams seems to be smoothing out the balance in its revenue stream, as it reported for the quarter that 29% of revenue came from consumer, 33% from automotive, and 38% from industrial and medical segments. Geographically, 53% of the revenue came from the Asia-Pacific region, 27% from EMEA, and 20% from the Americas.

Ams said net income edged up by 1%, reporting $12M for the third quarter in both years (presumably using rounded figures).

Our business performed well in the third quarter and delivered results clearly above the midpoint or near the upper end of our guidance,” said ams Osram CEO Alexander Everke. “Despite continuing supply chain imbalances, our automotive business was strong while our consumer business contributed attractively in line with previous expectations.”

However, sounding a theme that lighting companies Signify and Fagerhult both emphasized in their own recent quarterlies, Everke and chief financial officer Ingo Bank cautioned against the well-known sluggishness in supply chains afflicting the global economy.

Ams Osram seems to be feeling double-sided effects, both as a supplier and receiver of goods. In one particularly troubled area, orders from automakers seem to have slowed as car companies await delivery of other goods they need for production runs.

“We see ongoing tightness in chip supply and imbalances in supply chains, particularly in the automotive market,” Everke said. “This is introducing revenue volatility into automotive supply chains as component shortages trigger lower production volumes at automotive OEMs.”

On a conference call with analysts this morning, CFO Bank described financial visibility as “relatively small, because volatility in the supply chain is quite substantial,” and noted that the situation requires “weekly calls with our suppliers and customers on components, shortages, and changes in certain delivery plans.”

The end is not immediately in sight.

“We expect that these imbalances will persist well into the coming year and continue to be accompanied by tighter availability of certain materials and supplies,” Everke noted. Like Signify and Fagerhult, ams has every intention of raising prices to offset at least some of the extra supply costs it is incurring.

The malfunctioning supply chain appears to be affecting various product areas, including not just existing lines but future ones as well. For instance, Everke told analysts that “the current market situation with the shortages and the complex supply-chain situation potentially will delay the introduction of significant lidar applications.”

In an outlook for the current fourth quarter, ams Osram said it expects group revenue between $1.35B and $1.46B. That range represents a drop from the $1.68B it reported in the fourth quarter of 2020. It also anticipates an adjusted EBIT operating margin between 8% and 11%. Last year, it was 17% in the fourth quarter.

Since completing the Osram acquisition, ams has been working hard at integrating the two companies, a process that has entailed cost cutting, layoffs, and the elimination of redundant operations.

On the analysts’ call today, Everke and Bank both shed some light on intentions the company stated last May to seek “optimization opportunities” across its manufacturing plants in Austria, Germany, Malaysia, China, Singapore, and the Philippines. We will report on these in a separate article tomorrow, when we will also glance at the company’s hopes for micro LEDs.

MARK HALPER  is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

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