AMS Osram emits client-concentration risk signal
29/02/2024 12:37
(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
LONDON, Feb 29 (Reuters Breakingviews) - Aldo Kamper put
too many eggs in one basket, and they just cracked. The CEO of
AMS Osram AMS.S saw shares of his 1.2 billion Swiss franc
($1.4 billion) sensor company fall 43% on Thursday after it
unexpectedly cancelled a major micro-LED project, creating an
impairment charge of between 600 million euros to 900 million
euros for the first quarter of the year. The offending scheme,
making displays for devices like the Apple Watch and virtual
reality headsets, was supposed to start bringing in revenue from
2025, according to Bernstein analysts. Now the Swiss group is
cutting its revenue growth target to the bottom half of a 6% to
10% range, and refusing to commit to a 2026 adjusted operating
profit margin of about 15%.
The risk was hiding in plain sight. AMS merged with Osram in
2020 with the hope of diversifying the former’s heavy exposure
to Apple AAPL.O – which provided 40% of revenue – with the
latter’s expertise in making car-related products. But its three
biggest clients still make up around 20% of revenue.
Kamper hasn’t quite set out how he’s proposing to replace
the lost growth. The likes of $40 billion semiconductor group
STMicroelectronics STMPA.PA also count Apple as a major
customer, and the revenues of currently favoured tech groups
like Arm ARM.O rely on potentially saturated sectors like
smartphones. Anyone wanting to avoid an AMS-style implosion
should get diversifying. (By Karen Kwok)
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(Editing by George Hay and Oliver Taslic)