Osram's classic light bulb logo is not on display at its stand at the Electronica trade fair in Munich this week.
Instead it is using the fair to promote its new products. Osram’s subsidiary, Opto Semiconductors is presenting the latest LED chip developments – warm colors for the right lighting in offices or luxury cars. "We are in an optimistic mood,“ said Aldo Kamper, the boss of the LED chip division.
Mr. Kamper's good cheer belies the fact that headlines about Osram have mostly been negative of late. The traditional light bulb business is going downhill faster than expected.
Job losses have increased too. Osram's board of directors, headquartered in Munich, announced in August this year that it planned to axe a total of 7,800 out of a global workforce of 34,000 by 2017.
Company boss Wolfgang Dehen will leave the company by the end of the year. His successor, Olaf Berlien, will have to find a convincing strategy for the future.
The LED chip division will continue to play a key role. Osram is earning well in this area, despite competition from Asia. The company is in second place behind Japanese-owned Nichia with 6.9 percent of the $18 billion world market, according to experts at IHS, a U.S.-based provider of global market & economic information. Samsung and Seoul Semiconductor claim third and fourth place respectively.
Pressure on prices creates new applications and, with them, new markets. Aldo Kamper, CEO, Osram Opto Semiconductors
Osram’s LED chip business, Opto Semiconductors, grew by 11 percent in the last quarter to around €300 million, with a return on revenue of around 17 percent. For the whole year revenues amounted to just over €1.1 billion.
According to a source close to Osram, despite all problems, two-thirds of the company’s business is growing: the LED components, as well as special lighting for the automotive industry and the LED lamps and solutions.
Now Mr. Kamper is throwing down the gauntlet to competitors in Asia: "We intend to outperform the market in terms of growth.” The aim is to become an even bigger number two – Nichia is twice as big.
But change will be slow.
"Nobody is under the illusion that that is going to change from January 1," said an Osram supervisory board member to Handelsblatt. The new boss will not be able to avoid implementing the job cuts already announced.
So it is all the more important that Osram's LED business succeeds.The prices of LEDs is also falling by by double digit percentage figures, but Mr. Kamper swears he is not worried.
"Pressure on prices creates new applications and, with them, new markets," he said. A positive side-effect is the consolidation in the market. In fact, some of the new competitors from China have already vacated the market. Osram does not rule out aquisitions if it helps them increase their presence in the LED sector. "If we come across the right company, we will have a good look at it," said Mr. Kamper.
Osram has great hopes for a new LED chip with a record 256 pixels, which can be controlled individually. While traditionally one chip corresponds to one pixel, in future, with this new kind of chip, very compact and intelligent sources of light can be created with freely adjustable light distribution.
It was developed in a joint project between the research ministry with, among others, Infineon and the Fraunhofer Institute IZM, global technology research institute.
"This technology gives us a lead of two-to-three years over the competition", estimates head of technology Ulrich Steegmüller. The chip could be used for automobile headlights in special situations, like in urban or bad-weather lighting conditions.
The automotive segment is much more lucrative than general lighting, but Mr. Kamper said it would not be a good idea to focus just on that. "It is best to have several legs to stand on," he said.
In many global regions there is still a backlog of demand for lighting. Mr. Steegmüller puts it like this: "The world is still a relatively dark place."
Axel Höpner is the Handelsblatt Munich bureau chief. To contact the author: [email protected].