(Bloomberg) — Shares of Apple supplier AMS Osram AG soared Thursday after the Swiss semiconductor maker said its customers could be forced to cancel key projects and sell some of its Malaysian production sites. This resulted in a record decline.
Most Read Articles on Bloomberg
AMS Osram is considering the possibility of a second phase of the sale of its Kulim plant in Malaysia following the sudden decision by one of its largest customers to cancel the project, CEO Aldo Camper said.
“We need to make decisions in the coming days and weeks that will affect many people,” he said during a conference call Thursday.
Bloomberg News reports that Apple has been working with AMS-Osram and other suppliers since around 2018 on components for an updated display set for future versions of the Apple Watch Ultra. The micro-LED screen technology includes more bespoke Apple technology to deliver brighter images with more accurate color reproduction.
A cancellation with AMS-Osram does not necessarily indicate that the new Apple Watch has been discontinued. Because AMS-Osram was only a small company for overall product development, Apple likely relies on multiple other suppliers, according to people familiar with the matter.
AMS-Osram executives declined to identify the customers. An Apple spokesperson did not respond to a request for comment.
AMS-Osram is making significant investments in the micro-LED field. The company has committed to spending €800 million in 2022 to expand its manufacturing facility in Kulim to produce micro-LED displays. The company expected to see first revenue from the technology in 2025.
However, development took longer than expected. The introduction of micro-LEDs in the Apple Watch has been delayed from 2025 to 2026, according to an August report from Taipei-based research firm TrendForce.
Shares fell by as much as 45% on the Zurich market to CHF 1.21, the lowest since the company’s initial public offering in 2009. Extron SE, which supplies chip manufacturing equipment to AMS Osram, also fell by as much as 22%, weighed down by a weaker-than-expected operating profit margin and no guidance on orders.
AMS Osram will incur impairment charges of between 600 million euros ($651 million) and 900 million euros this quarter as it reviews asset values related to projects involving micro-LED technology, it said in a statement on Wednesday. did. The company has lowered its medium-term sales growth forecast from 10% to a maximum of 8%.
The company’s financial woes were further exacerbated by the slump in the semiconductor industry and weak demand for consumer equipment. The debt-ridden company is in the process of restructuring, raising 2.25 billion euros in a refinancing plan completed in December. Mr. Kamper and chief financial officer Rainer Irl both started their jobs less than a year ago.
Stifel analyst Jürgen Wagner said of AMS Osram: “The cancellation of this project will take a big hit on the stock price, as long-term growth prospects are much lower without the micro-LED opportunity. I’m thinking about it,” he said.
bond drop
AMS Osram corporate bonds at 11:20 a.m. London were also hit by the news, with the 625 million euro 10.5% bond due March 2029 trading at 8 cents against the euro, according to Bloomberg price source CBBT. The stock fell to a cash price of 102.6 cents. .
Zero-coupon convertible notes due March 2025 also fell 3 cents to a cash price of 92.5 cents per euro.
The convertible notes were issued during the low interest rate era of 2018, when many technology companies were able to essentially get free debt in exchange for exposure to their own stock. Since interest rates have risen, many of these bonds have fallen as the underlying stocks have fallen.
In the case of AMS-Osram, these convertible bonds are designed to convert into equity at maturity in 2025 at a price of 50.1886 euros. This is almost a 3,000% premium to the current share price.
–With assistance from Allegra Catelli, Alexey Anishchuk, and Mark Gurman.
(Updates Apple product planning details.)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
