The company opened its state-of-the-art factory to journalists recently. Mark Halper was there for LEDs Magazine, exploring CEO Olaf Berlien's "high-tech" proclamations, discovering novel uses of LEDs, and finding out what might come next for Osram on the IoT road.
KULIM, MALAYSIA - There has been no greater vote of confidence in the future of the LED industry recently than when Osram opened its sprawling €370 million ($436 million) LED chip factory in Kulim, Malaysia late last year.
As LEDs Magazine wrote at the time, Osram is ogling a world that is growing more and more addicted to digitization. The company believes that LEDs - optical semiconductors - will play a huge role in satisfying the planet's craving for electronic connectivity and the all-important data collection that goes along with it.
On time, on budget: Osram built the LED chip manufacturing plant within 18 months of breaking ground. It credited the Malaysian government with expediting the process.Photo credit: Osram.
While many other types of semiconductors will also have a strong presence in this brave new world known as the Internet of Things (IoT), Osram maintains that the data-linked potential of the light-emitting diode will be irresistible in both illumination and non-illumination settings.
"Our factory in Kulim is a symbol of the transformation of Osram into a high-tech company," Osram CEO Olaf Berlien declared at the November opening ceremony, attended by LEDs Magazine. Berlien heralded the plant as "the world's most modern factory for LED," a proclamation echoed by Malaysia's Minister of International Trade and Industries Mustapa Mohamed, who also called the facility "an important milestone not only for Osram but also for Malaysia."
The uses of LEDs in the IoT will be so prevalent that Osram expects a quick return on its investment in the Kulim facility.
Thus, after opening the 500,000-ft2 production space and offices a mere 18 months after breaking ground, Osram sees a good possibility of rapidly expanding further on the 1-million-ft2 site. Berlien told us the company will decide the timing of Kulim's next build-out this year.
What's there already is impressive. Kulim is believed to be the world's largest LED facility using 6-in. wafers as opposed to 4-in. And it marks the first time that Osram has located the epitaxy process outside its home country of Germany, where its Regensburg plant has until now handled it exclusively. Epitaxy is the "secret sauce" portion of LED production, the pre-semiconductor stage of laying down layers of material that generate light.
And here's why Osram is so stoked on the prospects for continued expansion of the plant: Its LEDs will serve many IoT purposes that go well beyond just general illumination. Both Berlien and Aldo Kamper, CEO of Osram's Opto Semiconductors (OS) division, dwelled on this theme repeatedly during our three-day visit to the site, which came a couple weeks after Osram reported financial results for its fiscal year 2017, in which OS reported over a 19% revenue jump to €1.69 billion. The spike positioned OS to soon emerge as the largest of Osram's three main business units; the other two are Lighting Solutions and Systems, which is basically general lighting, and Specialty Lighting, which focuses on automotive.
"We had a very successful year in 2017, with growth of 20%, and this growth came from a lot of new demand and new applications," noted Berlien, who also pointed to "attractive growth markets for many years to come."
New applications, indeed. In general lighting, LED chips will play a vital role in broadening functionality, such as delivering tunable light frequencies throughout the day that improve human wellbeing, and in delivering all sorts of other IoT schemes, such as monitoring room usage, tracking assets, issuing traffic advisories, and many more.
Keeping it fluid: The sprawling four-story building uses only the top floor for actual production. The second and third floors are largely empty, except for a highway of pipes and ducts carrying fluids, chemicals, gases, water, and air to and from the cleanroom. Osram said that such use of space - as shown by this shot of the third floor - is typical in the industry. The first floor serves to catch escaped contaminants in the event that's necessary. Photo credit: Mark Halper.
But the new uses of LED chips reach well outside of general lighting. Just a few examples: Osram sees a healthy future in infrared (IR)-LED sensors embedded in fitness watches to help monitor everything from heart rate to sugar levels, and in phone-embedded iris scanners for security purposes; IR LEDs will also help provide directional cues in drones and virtual reality glasses. In automobiles, Osram believes LED chips and sensors will play a major role in automobile steering systems, including driverless cars; also in cars, LEDs can help in recognizing facial patterns that indicate tiredness in a driver. They are also increasingly acquiring intelligence in headlamps so as to optimize roadway lighting while minimizing glare for other motorists.
And so on and so on. It was the talk of the town in Kulim.
"Looking ahead, we see ongoing demand and double-digit growth for this business segment," said Berlien. "It is a symbol of entrepreneurial spirit. On the one hand, rising demand comes from the new markets of visualization and sensing. On the other hand, we see strong demand for our premium LEDs from the automotive sector. At the same time, we see tremendous growth potential in the general lighting market."
One of the many segments that Berlien singled out was the consumer sector, including the aforementioned fitness watches and cellphones that rely on LEDs to carry out new functions.
"New wearables are counting steps, monitoring blood pressure," he noted. "And if you think about the new iPhones, they have iris scan locking systems, they have facial recognition; so many new applications are coming up."
Some like it hot: It's so hot and humid in Malaysia that the camera's lens fogged up while snapping this shot of Osram CEO Berlien greeting the country's Minister of International Trade and Industries Mustapa Mohamed outside the factory door. Osram doesn't mind the heat. The company cites many reasons for locating there, including a legal system that protects intellectual property, a stable society, low-cost labor, well-educated engineers, and the prevalence of the English language. Malaysia itself is proud of its multiculturalism, on display in the form of street signs pointing to a Chinese Taoist temple, a Hindu temple, and a mosque all within a few hundred meters of each other in George Town, Penang. Photo credit: Mark Halper.
To demonstrate one of the applications, as we wrote in our earlier article, Berlien, Kamper, and Mustapa dispensed with the clichéd ribbon cutting and instead unlocked the LED chip factory doors by staring at a tablet computer equipped with iris scanners based on Osram IR LED technology - a gesture that solidified the global "digitization" that is driving Osram's revenue model.
It's all testimony to Berlien's oft-stated mantra that Osram is now a high-tech company.
And it certainly made sense to Osram OS boss Kamper, who underscored the breadth of new areas on which Osram is banking.
"It's a multitude of applications that's growing," Kamper told LEDs. "That's the nice thing. It's not about just one application that has to be successful. Otherwise, the factory is empty afterwards. It is about a multitude of applications that we see a high demand for."
Room to move: The Osram OS chip factory is on a site with plenty of space to expand. Photo credit: Osram Opto Semiconductors.
Kamper expanded on Berlien's wearables theme. "We see more and more opto semiconductors being used in the consumer electronics space, and not only for lighting purposes," he noted. "So it's the flashlight in your cellphone, but it's also about safety and security features like the iris scan in your cellphone. It's about generating more signals. All these wristwatches we are wearing to measure heartbeat, blood pressure, and things like that, they all need signal generation, and the signals are usually generated with opto semiconductor technology."
Kamper hesitated to identify any one market as a number-one growth area. But in addition to new segments such as wearables, emerging applications for LEDs will certainly include high-tech twists on general lighting.
"If you think about the intelligence that gets put into the luminaire, for example, LEDs are not only about energy efficiency anymore, but also about functionality," noted Kamper. "Human-centric lighting, for example," he added, referring to the phrase often given to systems that tune light frequencies to suit human circadian rhythms and wellness.
Osram also clearly expects the automotive sector to drive LED demand, for purposes ranging from headlamps to all sorts of other functions related to steering, ambience, and autonomous driving.
"The penetration rates in car headlamps especially is driving demand very rapidly at the moment," Kamper said of the automotive sector. General industry growth has exceeded expectations, which two years ago had assumed that by 2020 LED light sources would comprise about 15% to 20% of the overall headlamp market.
"We are probably at that point already," Kamper said. "Now, by 2020, we're probably going to see 35% to 40% LED penetration."
Looking ahead: CEO Berlien with Osram's chief technology officer Stefan Kampann (left), who was on hand for the opening. Since joining Osram from Bosch in July 2016, Kampann has helped the company acquire or invest in a number of technology companies. One source said the company could soon add a technology consulting firm to the mix. Photo credit: Mark Halper.
Along with that comes more sophistication in both the electronics and information technology of headlamp LEDs. For example, Osram is developing LED chips that will enable car headlamps to intelligently brighten, dim, and redirect when necessary in order to minimize glare for oncoming motorists or in rearview mirrors for drivers in front of the headlamps. In November, Osram entered a joint venture with automotive tire and electronics maker Continental to combine Continental's CMOS chip and controller technology with Osram's LED know-how in order to add more pixels to headlamp LEDs and to individually control each pixel.
Osram is also developing LED-based technologies to customize the interior illumination in cars - a feature that could become especially important in what Kamper called "the shared car economy," where a car automatically resets its ambience and dashboard lighting depending on who enters the car.
In other automotive areas, Osram is advancing lidar technologies that use IR light in a radar-like manner to help detect objects in the path of a car and thus help steer both manned and unmanned vehicles (in Osram's case, it seems to be emphasizing laser chips more than LEDs for lidar, although both can be used). It is also developing interior LEDs to help read a motorist's facial patterns and detect signs of tiredness.
Osram's confidence in the high-tech future of the LED industry has led it also to invest in or acquire a number of technology-oriented and specialized LED companies over the last year or two, such as Digital Lumens, Beaconsmind, Tvilight, Leddartech, LED Engin, and others. More are coming. Next up, according to one source: Osram will acquire a technology consulting company (which might have happened by the time this story is published).
Makings of the market: Osram OS CEO Aldo Kamper predicted that the growth of the LED market will come from a "multitude of applications," with many segments, not just one or two, driving growth. Photo credit: Mark Halper.
With all that going on, it's no wonder that Osram has high hopes for the state-of-the-art Kulim LED chip manufacturing plant, which will fire up 13,000 wafer starts per week in a country that draws Osram's high praise.
"Malaysia is a good place to be," said Kamper. "It is a very cost-efficient environment. The labor cost is attractive. There are well-educated engineers here, the local language is English. And the legal system is based on English law, so in terms of intellectual property protection, we feel quite safe here. Plus, it's a stable environment in terms of political stability."
That's the sound of confidence resonating loudly from Kulim. The world's high-tech future will tell whether it rings true.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist (firstname.lastname@example.org).