AMS is acquiring OSRAM.

It has been reported that AMS—the supplier for Apple’s facial-recognition sensor used in the Apple iPhone—is going to acquire OSRAM, most known in Europe for their light bulbs (also together with CREE and Nichia, as one of the world’s big-three LED suppliers).

We’re going to explore here what ramifications this acquisition may have specifically on Apple’s smart glasses efforts.

First, some background on the acquired and acquiring companies. In January, AMS received a patent for a breakthrough: a “behind the screen” sensor design (this should eliminate the iPhone “notch”). However, this did not keep AMS’ stock price from taking a 13% tumble in February upon warnings from Apple pointing “to stagnating smartphone demand and a cooling Chinese economy.” By April, AMS had a 20% rebound, when they announced they would be offering their facial recognition sensors to Android makers. Apple previously had an exclusivity contract that appears to have now come to an end.

For their part, OSRAM’s own stock has lost more than half its value since January of last year. OSRAM has also had a recent optoelectronic breakthrough of their own, with a high brightness pico-laser:

To understand the significance of this development, we will take a cursory look at the competitive landscape in low-profile near-eye optic displays, some internal Apple politics, and geopolitical risk in Apple’s supply chain.

As I’ve covered in my prior articles for UploadVR, and more recently for 20/20 Magazine, there has been a battle between waveguides and laser-to-holographic combiner displays, for dominance in low-profile (consumer viable form factor) near-eye optic display systems.

After investing $200M in Corning's material optics group, the same month they poached optics engineer Michael Simmonds from BAE Systems’ waveguide team, Apple followed with their acquisition of Akonia Holographics, maker of holographic waveguide displays. Coupling Apple’s prior acquisition of MicroLED maker, LuxVue, to a MicroLED manufacturing contract awarded to TSMC of Taiwan, it appeared that Apple’s display module for a consumer smart glasses product was fully formed: a MicroLED light-engine illuminating a holographic waveguide.

More recently entering the fray are laser-to-waveguide hybrids: using a pico-laser to illuminate the input coupling of a waveguide. These new hybrid displays—debuted by both DigiLens, and Creative Microsystems—have received the most attention for their incorporation into Microsoft’s long awaited HoloLens 2 (with display developed in partnership with MicroVision).

The principal advantage to these new pico-laser driven waveguide designs is that they’ve been shown to produce a wider FOV than possible with existing MicroLED or LCD light-engine modules.

With AMS in ownership of OSRAM’s laser tech, Apple suddenly has a preexisting supplier who will soon own the smallest & brightest pico-laser light-engine on the market, and suitable for use in a wide field-of-view near-eye optics display.

This is a game changer, the Apple supply chain just leapfrogged their competitors.

There are other considerations…

In July of this year both Jony Ive and Marc Newson resigned from Apple’s design studio. It would be alleged that this was principally the result of a power struggle between Jony Ive and Jeff Williams, and this kerfuffle was at least in part due to control of product direct on Apple’s yet-to-be-revealed smart glasses product.

Shortly thereafter, a report came out of DigiTimes—a Taiwanese trade publication for the Asian electronics manufacturing industry—that Apple was shelving their smart glasses. I was highly skeptical, and reported then that this was less likely a product cancellation, and more likely both a pivot to a more health-focused than fashion-focused product—given the recurring Williams vs Ive battle(s)—and a reevaluation of Apple’s supply chain, due to geopolitical risk in Chinese consumer electronics manufacturing.

In the midst of a product pivot, the AMS OSRAM acquisition provides Apple the opportunity to reevaluate their display strategy, and an opportunity to further insulate their supply chain from geopolitical risk.

It's worth noting, Jeff Williams and Tim Cook are both supply chain guys. In addition to moving to a pico-laser driven display system with a wider field-of-view, opting for OSRAM’s pico-laser would also mean moving to a supplier with prior experience manufacturing optoelectronic components at scale… who is not in China.

Let's have a look at Apple’s core components of any would-be Apple smart glasses product—both acquires and suppliers:

Apple in general, and their prospective Apple glasses in particular, will have one of the most insulated supply chains, diversified out of Chinese exposure.

Lastly—and this is more conjecture than industry intelligence—at this stage Apple is mostly using China for final assembly. For a smart glasses product, if I were advising Apple, I would say they should be moving final assembly to Italy.

Christopher Grayson is a writer and analyst covering smartglasses, fashion eye-frames, and near-eye optics display systems. He conducts research for investors, consults for tech companies and can be followed on Twitter at @chrisgrayson.

Two years ago OSRAM produced the video below promoting their optoelectronics group, including near-eye display tech, and eye-tracking technology.

UPDATE:

The AMS acquisition bid for OSRAM turned into a bidding war between AMS and Bain Capital, that saw the CEO split with the board on support. As of October 7, 2019, although a majority of shareholders approved the acquisition, they did not reach the 62.5% of shareholders threshold needed to approve the buyout. AMS is expected to return with yet another bid. Bain may or may not.

Readers can follow the twists and turns of the AMS acquisition—and other coverage of the smartglasses, near-eye optics, as well as the fashion eye-frames industry—by following me on Twitter.