Osram to Invest $3.2 Billion in New Lighting Technologies
Osram will invest around $3.2 billion in new semiconductor-based lighting technologies and applications by 2020. Of this amount, approximately $2.1 billion will reportedly be spent on research and development in order to further strengthen Osram’s technological leadership and to expand into new markets. In addition, Osram has planned another $1 billion for the construction of a new LED chip plant in Malaysia in order to unlock additional growth potential, in both the dynamic, technology-driven general lighting markets and niche markets.
The “Diamond” innovation and growth initiative comprises several strategic measures. In a first step, Osram will invest around $396 million in its Opto Semiconductors segment for a new LED chip plant in Kulim, Malaysia. Since further expansion measures are already being planned, the company expects to invest a total of around $1 billion in the plant by 2020. The new plant will reportedly represent the largest and latest 6-in. LED chip production site worldwide. The additional production capacity will reportedly enable Osram to increase its market share in the general lighting markets. This market segment is the largest in the area of opto-semiconductors, with a current volume of around $6.1 billion. Given average annual growth rates of 7.5%, it offers the company the greatest potential until 2020. Through economies of scale and synergies, Osram can also reduce its cost position in other market activities such as automotive lighting as well as applications for mobile devices.
“With a focus on profitability, flexibility, and entrepreneurship, following a phase of strategic realignment, we are now launching the ‘Diamond’ innovation and growth initiative,” said Olaf Berlien, CEO. “This means we are switching the focus to sustainable growth, benefitting even stronger from the potential offered by semiconductor-based technologies.”
Osram is also planning additional investments in the Specialty Lighting (SP) segment to facilitate the broad-based rollout of new technologies in the market and to realize further growth potential, specifically to strengthen the activities with innovative lighting modules in automotive lighting. According to Osram, it is currently the only company in the world offering laser modules for headlamps ready for series production. Organic light-emitting diodes (OLEDs) are also about to be rolled out for broad-based use in rear lights of vehicles. Osram expects the market for laser and OLED applications in the automotive sector to amount to around $1.1 billion in 2025.
In the recently created Lighting Solutions & Systems (LSS) segment, Osram will reportedly roll out many different measures in the coming years to realize intelligent, technologically demanding lighting solutions. Following the announced review of the luminaires and solutions business (LS), Osram aligns this segment towards profitable growth. In this area, especially the market entry and the range of integrated solutions offered are to be improved. Given the increasing importance of complex lighting solutions, Osram is also shifting the focus on expanding the electronics and software expertise. Over the next two years, new capacities for electronic ballasts and light management systems will be created for this purpose.
With the announced innovation and growth initiative, Osram will also increase its research and development budget. The company intends to promote the development of smart city applications, wireless lighting control as well as laser and OLED technology. Despite consolidation and focusing measures, Osram has kept its research quota at a constantly high level of just over 6% of revenue. After the initiated carve-out of the general lighting lamps business, the increased research expenditure will account for approximately 9% of revenue by fiscal year 2016.