Advanced Lighting a Future Market Opportunity

Q: What growth opportunities has OSRAM detected in the original equipment and aftermarket segments?

A: The automotive industry is the most important segment for our Specialty Lighting (SP) division, including both aftermarket and original-equipment operations. In the latter, the company sees significant growth opportunities particularly in the premium-car segment. We participate with most OEMs in the country including Ford, Volkswagen and FCA and now that BMW, Audi, Mercedes-Benz and INFINITI are arriving to the country, we expect a boost to our original equipment operations.

The aftermarket also presents attractive opportunities. Unfortunately, we have to compete with products that have both a lower cost and lower quality, which has proven to be a challenge. Our strategy is to educate our customers regarding the advantages provided by OSRAM, while developing a strong product portfolio that can participate in all market segments. Original equipment is our biggest market in Mexico and we have established close and strong relationships with our clients in this segment. That being said, our growth opportunity in the aftermarket is much larger and we have implemented a much more aggressive strategy to improve our position.

Q: Regarding advanced lighting technologies, where does OSRAM see the biggest opportunity for the automotive industry?

A: LED, OLED and laser-lighting technologies all have strong development potential in the automotive market. However, LED appears to be the preferred innovation in Mexico. Laser is still practically unknown in the domestic market and OLED could be a second stage in the development of LED technology. Advanced lighting technologies are predominantly found in the premium and luxury market, mostly because of the price-driven nature of that segment.

Q: What is the company’s R&D commitment and what opportunity is there in lighting components with connectivity and self-driving applications?

A: In 2016, OSRAM completed its carve-out process, separating the traditional lighting division, which is now called LEDVANCE, from the rest of the company’s operations. The sale of LEDVANCE was finalized in the spring of 2017. Our company is now more driven by high-tech products and applications and OSRAM is fully committed to the development of new technology by developing long-term strategies based on innovation. This is particularly important in the automotive industry, considering that we expect LEDbased lighting to grow at a compound annual growth rate of 9 percent between 2015 and 2020. Before the carveout, OSRAM destined 6 percent of its revenue for R&D applications but now, that number has grown to 8 percent, leading to an increase in R&D expenditure in the SP division of 22 percent. Between 2016 and 2020, the company plans to invest €2 billion (US$2.2 billion) in R&D activities. Even though Mexico is still focused on LED, our goal is to keep investing in new technologies, including laser modules for headlamps and OLED applications.

Q: What is OSRAM’s overall growth forecast and how does that translate to its Mexican operations?

A: OSRAM is already a leader in the lighting industry and our growth in the automotive industry will be sustained by our existing and new relationships with Tier 1s and automakers. Specifically in Mexico, our growth in 2016 has been superior to the country’s GDP and our goal is to maintain that success in 2017. According to its “Diamond” innovation and growth initiative, OSRAM’s global goal between 2017 and 2020 is to reach annual revenue growth rates of 8 percent with total sales between €$5 billion (US$5.5 billion) and €$5.5 billion (US$6.1 billion). We have established a five-year strategy for our Mexican operations and advanced lighting development is a main priority. We also want to consolidate our distribution and supply operations both in the original-equipment and the aftermarket segments, making our operations as cost- and time-efficient as possible.