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5. OSRAM Licht AG Business Report FY ended Sep. 2015

OSRAM Licht AG Business Report FY ended Sep. 2015

-Since July 1, 2015, the Company's business model has been implemented at operational level using five business units: Specialty Lighting (SP) and Opto Semiconductors (OS), both of which remained unchanged, Digital Systems (DS), Lighting Solutions (LS), and Lamps (LP).

Factors
1) Overall
-In the FY ended September 30, 2015, the Company’s nominal revenue performance, meanwhile, reflects the strong tailwind for their business from the changes in exchange rates compared with the previous year, in particular as a result of the significant fall in the value of the euro against the U.S. dollar. Of the Company's overall revenue growth, 7.9% was attributable to currency translation effects, which were reflected in the Company's segments to varying degrees of intensity, depending on the key sales markets in each case.

2) Specialty Lighting
-The Specialty Lighting segment recorded a moderate year-on-year rise in revenue on a comparable basis in fiscal 2015. The growth is attributable to a positive trend in all regions. From a technological perspective, the LED business grew by around one-fifth overall, while revenue at Specialty Lighting came mainly from the automotive business; although the Company recorded above-market growth rates throughout the fiscal year, demand for their products was increasingly affected by lower demand in China towards the fiscal year end.

3) Opto Semiconductors
-With regard to the Opto Semiconductors segment’s products, the largest increase were achieved in the automotive and industrial business; another growth driver was the infrared components business. Including positive currency translation effects of 9.7%, nominal revenue increased significantly overall.

Corporate Strategy

Investment Plan
-The Company announced that it will invest around EUR 3 billion in new technologies and applications by 2020. Of this amount, approximately EUR 2 billion will be spent on research and development. Additionally, the Company has planned another EUR 1 billion for the construction of a new LED chip plant in Malaysia. The company will invest around EUR 370 million in its Opto Semiconductors (OS) 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 EUR 1 billion there by 2020. The new plant will manufacture 6-inch LED chips. (From a press release on November 10, 2015)

Restructuring

The general lighting lamps business
-The Company announced the carve-out of the general lighting lamps business. As an independent entity, the business will be able to operate more freely on the market and realize strategic options, such as partnerships, more easily. (From a press release on June 12, 2015)

Contracts

-The Company announced that it is supplying its laser modules for the headlights of the BMW 7 Series. The Osram laser module features three high-power diodes from Osram’s subsidiary Opto Semiconductors. (From a press release on February 4, 2016)

-Osram Opto Semiconductors announced that the headlights on the new Mercedes-Benz CLS are equipped with its Oslon Compact light-emitting diodes. These compact high-power LEDs can be arranged very close together in the headlight so that adaptive front lighting systems can be achieved. In addition to this current project, Osram and Daimler are working together to develop future innovative automotive lighting systems – as partners in the µAFS research project sponsored by the German Federal Ministry of Education and Research (BMBF). (From a press release on October 31, 2014)

-The Company announced that its LEDriving Xenarc Headlight, a full headlight which utilizes a combination of xenon and LED technologies, is fitted to the Audi A4. (From a press release on September 16, 2014)

-Fiscal year 2015, the average number of employees in R&D was 2,433 FTE (full time equivalents; 2014: 2,441).

Technological Alliance

-Toyoda Gosei Co., Ltd. and the Company announced that they have extended their agreement which allows the companies to use each other's patents for specific light emitting diode (LED), including white LED, and laser technologies. The new agreement extends the scope of the patents covered by the original 2007 agreement, to include patents filed after the execution of the original agreement. (From a press release on October 7, 2014)

Product Development

New LED chip
-Osram Opto Semiconductors and its partners on the µAFS research project have reached the important first milestone – a new LED chip with the array of 256 light points (pixels). In previous adaptive front lighting systems (AFS) one pixel corresponded to one LED component or one chip, whereas in this prototype one chip contains 256 pixels which can all be individually controlled. The project is being funded to a total of EUR 7 million by the German Federal Ministry of Education and Research and will run until January 31, 2016. The aim of the project is to develop the technical principles for a new class of energy-efficient LED headlamps. (From a press release on October 23, 2014)

Low beam unit
-Osram Opto Semiconductors will be taking the opportunity offered by the Vision Congress in Paris to showcase an LED for car headlights which has a luminance three times that of existing versions. A low beam unit measuring only 30 mm x 50 mm generating a 1400 lumen from a single LED chip as its light source could be reality in only a few years time. (From a press release on October 14, 2014)

Low-profile LED
-The Company's Opto Semiconductors segment has developed a new LED called the Synios E4014, which features a low-profile rectangular shape that enables the light from the LED to be injected into light guides for a variety of lighting solutions. With dimensions of 4.0 mm x 1.4 mm x 0.57 mm, the Synios E4014 will be used primarily for visually enhancing "white goods" such as ovens and refrigerators, and for lighting systems in vehicles and displays. (From a press release on May 6, 2014)

Turn indicator LED
-The Company has developed the yellow Oslon Compact LED for turn indicators in vehicle forward lighting. By using indium gallium nitride (InGaN), the Oslon Compact is able to produce large amounts of light despite its small size. The Oslon Compact has dimensions of 1.5 mm x 1.9 mm x 0.7 mm, and can produce more than 120 lumens at high currents and application temperatures of 100 degrees Celsius. (From a press release on February 18, 2014)

Divestment

-Cash flows from activities in fiscal 2015 include an inflow from the sale of OSRAM Licht Group’s former headquarters in Munich in the mid double-digit million euro range.

Investment Outside Germany

-The Company opened its new LED assembly plant in Wuxi, Jiangsu Province, China. Having invested a low three-digit-million euro amount into the facility, the 100,000-square-meter plant is expected to have up to 2,100 employees by 2017. The new facility is the Company's second backend site whose primary activity is assembling LED chips into housings. At full capacity, the new plant will be capable of producing several billion LEDs per year. (From a press release on May 21, 2014)