Ams Osram’s Twin Turnaround: €1B Bond Cuts Debt Costs While EU Chip Strategy Opens New Front

Ams Osram slashes interest costs via €1B bond, repositions Austrian foundry for EU chip sovereignty under Chips Act 2.0, but faces €400M liability from idle Kulim fab.

Ams Osram is rewriting its turnaround story on two fronts. While a massive refinancing operation is slashing interest costs by tens of millions each year, the company is also repositioning its Austrian foundry as a hub for European chip sovereignty under Brussels’ revamped Chips Act 2.0. The shares have already priced in much of the good news — they have surged 171% since the start of the year to close at €23.10 on Wednesday.

The centrepiece of the financial overhaul is a €1 billion senior notes issue carrying a 7.25% coupon and maturing in May 2032. Strong investor demand allowed the company to upsize the deal. Proceeds are earmarked for the full redemption of existing US-dollar notes that cost 12.25% and the partial repayment of euro notes yielding 10.5%. Alongside the bond, the management extended a €600 million credit line to secure liquidity for the coming years.

From next year, the debt restructuring will generate annual interest savings of around €40 million. The longer-term target is to cut total financing costs from as much as €300 million to below €150 million by 2028. That would free up substantial cash flow — the board expects free cash flow of more than €300 million this year, including proceeds from asset sales.

Those disposals are accelerating. Ams Osram is selling its non-optical sensor business to Infineon Technologies for €570 million. The CMOS sensor unit is also being divested for €40 million, of which €35 million will come in cash and the rest as a loan. Combined with other ongoing portfolio pruning, the company forecasts total exit proceeds of roughly €670 million.

One large overhang remains unresolved. A new semiconductor fab in Kulim, Malaysia, sits empty after a key customer cancelled a micro-LED project shortly after construction. The idle facility costs the company a double-digit million euro sum each year. Management is urgently hunting for a tenant; exiting the contract would remove long-term liabilities of roughly €400 million from the balance sheet and give the cleanup a huge boost.

On the operational side, Ams Osram is betting on Europe’s renewed push for chip independence. The European Commission approved the second iteration of the Chips Act on June 3, shifting emphasis from factory construction to demand generation for locally made semiconductors. Approval timelines are to be capped at twelve months, and so-called “Grand Challenges” will promote AI-chip development.

The timing suits Ams Osram perfectly. Its site in Premstätten, Austria, is being positioned as a foundry for small and medium-sized European firms, specialising in custom chips for industrial and defence applications. CEO Aldo Kamper has identified intelligent automotive lighting, augmented-reality glasses, and optical data links for data centres as growth pillars. The company plans to invest €600 million in the facility by 2030.

First-quarter numbers already point to operational recovery. Revenue came in at €796 million, beating the company’s own consensus of €779 million. The adjusted EBITDA margin reached 16.5%, well above the 15% forecast. The core semiconductor business expanded 9% on a comparable currency-adjusted basis. For the second quarter, management guided revenue in a range of €725 million to €825 million.

Shareholders will gather in Premstätten on June 10 for the annual general meeting. One item on the agenda is the cancellation of a conditional capital increase linked to convertible bonds that were fully repaid in March 2025 — a purely administrative step that removes an obsolete dilution option. The AGM will also decide on expiring supervisory board mandates.

Despite the year’s stellar run, the stock at around €23 is still almost 14% below its 52-week high of €26.70, set only in late May. Analyst sentiment remains split: two buy recommendations, two holds, and one sell, while annualised volatility stands at nearly 120%. For Ams Osram, the next big catalyst is clear: if it can fill that empty Malaysian fab, the path to a sustainable turnaround will be wide open.