Ams OSRAM : Management Report and Group Financial Statement

			To our Shareholders	Our Company	Supervisory Board Report	Corp. Governance	Remuneration Report	Management Report	Group Financial Statements

Management Report

Overview of past fiscal year

Business results

Research and development Purchasing and manufacturing­ Employees Environmental management Subsidiaries and investments Risk management Outlook

Other information

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1. Overview of the economic environment and the past fiscal year

1.1 Development of the semiconductor sector

Geopolitical conflicts, high inflation rates, and rising interest rates had a negative impact on demand in many end markets in 2023, as in the previous year. The global semiconductor market recorded a decline of 9 % to USD 520 bn in the year under review, compared to USD 574 bn in the previous year, although monthly growth rates have been positive again since October of 2023. Excluding the highly volatile memory market (-31 %) in which ams OSRAM is not involved, the growth rate of the semiconductor market came to -3 % in 2023. The growth rate in the market for optoelectronic semiconductors, which is an important market for ams OSRAM, was negative at -3 %, after it stood at 1 % in the previous year. At -11 %, the growth rate of the market for sensors was significantly lower, dropping from 14 % in the previous year when it had registered above-average growth.

The most important end markets for ams OSRAM are the automotive market, industrial and medical technology applications and consumer devices such as smart- phones or wearables. Following an increase of 7 % in the previous year, automotive production recorded growth of 9 % in 2023. Based on ZVEI (Global Electric and Digital Industry) data, the growth rate in the industrial and medical technology sectors relevant to ams OSRAM was 7-11 % in 2023 (2022: 10-14 %). Shipments in the global smartphone market fell by 3 % in 2023, following a decline of 10 % in the previous year. In the global wearables market, shipments increased by 7 % (2022: -7 %).

1.2 Structure and development of the segments

The business activities of the ams OSRAM Group are grouped into two segments: Semiconductors and Lamps & Systems. Our Semiconductors segment comprises the Group's semiconductor-related business in the automotive, industrial, medical technology and consumer end markets. The business segment Lamps & Systems comprises the Group's business related to lamps and lighting systems, with a focus on the automotive market, as well as the industrial and medical technology markets.

Semiconductors

Our Semiconductors segment made the largest contribution to Group revenues in the year under review from its automotive, industrial, medical technology, and ­consumer end markets. In the automotive end market, the segment is the global leader in automotive LED lighting for a wide range of exterior and interior vehicle lighting applications. These include differentiated LED solutions for head lamps and other front lighting, exterior lighting (including signaling/rear lighting amongst oth- ers), and interior ambient lighting for vehicles. Other business areas in the segment include interior sensors, components for safety and ADAS systems and visualization technologies. High-performance solutions and innovations for exterior and interior applications form the basis of the Group's success and strong customer penetration in all key regions. Following a build-up of inventories in our customers' supply chains in 2022, the supply chains in the automotive market for LEDs normalized in 2023. Towards the end of the year, a significant upturn in demand was recorded, particularly from China. In summary, the automotive semiconductors business recorded solid full-year results for 2023. The segment confirmed its position as the world's leading supplier of LED automotive lighting in the year under review. It was also able to expand its customer project base and innovation pipeline across many product families.

The industrial and medical business in our Semiconductors segment recorded a mixed development overall, which was characterized by inventory adjustments and lower sales rates in the wake of a weak overall economic activity. After a weak start, demand increased but remained at lower levels compared to previous years. For example, demand for ams OSRAM's HyperRed LEDs (special red light-emitting diodes for plant cultivation lighting systems) remained weak as comparatively few lighting projects were started due to high energy prices and high financing costs. The Company's LED solutions for industrial and outdoor lighting, as well as industrial imaging, recorded much lower demand than in the previous year due to the weak macro-economic development. The medical market segment achieved solid results in a weak market environment, with the Company benefiting from its leading position in medical imaging solutions for computer tomography and digital X-ray systems. In the consumer end market, our Semiconductors segment is a major supplier of sophisticated sensor solutions for smartphones, wearables and other consumer devices for leading OEMs. The segment's business areas include display management, proximity sensors, 3D technologies, spectral and biosensors and other optoelectronic applications. A significant decline was recorded in consumer applications business

in 2023, as some important customer projects are coming to an end and there was a general decline in global smartphone sales. At the same time, the Group underlined its leading position in key submarkets with customers selecting ams OSRAM sensors for their future devices. Despite a weak overall market, there was a slight recovery in the market for smartphones with Android operating systems towards the end of the fiscal year, driven in particular by China.

Lamps and Systems

The Lamps & Systems (L&S) segment contributed the remaining share of Group sales in the reporting year. L&S's automotive business mainly comprises traditional halogen, xenon and signal lamps for vehicles, but also includes, amongst other products, LED-based lamps and modules and retrofit lighting systems. As a leading supplier of automotive lighting, L&S serves both automotive manufacturers and suppliers as well as the automotive aftermarket in the most important geographical regions. The automotive segment of L&S recorded a positive business development in 2023. The OEM business performed in line with expectations, while the automotive aftermarket business developed positively.

L&S's other business line comprise a range of lighting products for various entertain- ment, medical and industrial applications. These areas performed weaker in line with the market environment. The planned strategic realignment of the Lamps & Systems segment was completed in 2023.

1.3 New management and strategic realignment of Semiconductors segment

During fiscal year 2023, a new management structure was created for the ams OSRAM Group. On April 1, 2023, Aldo Kamper was appointed Chief Executive Officer (CEO), and on July 1, 2023, Rainer Irle was appointed Chief Financial Officer (CFO) of ams-OSRAM AG. Following an intensive review of previous business plans, the management adopted a new overall strategic direction, initiating a strategy and efficiency program called 'Re-establish the Base'. The program aims to focus on ams OSRAM's core portfolio, achieve a leaner group structure, and accelerate the market launch of innovations. The related measures are expected to improve earnings

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before interest and taxes by up to around EUR 150 mn by the end of the 2025 fiscal year. The Semiconductors segment will focus on its highly profitable core business with differentiated, intelligent sensor solutions, and emitter components with the best growth prospects. Meanwhile, our leading positions in the automotive, industrial and medical technology sectors are to be expanded. In the Consumer segment, selected projects based on technologies where ams OSRAM can differentiate itself on a sustainable basis from the competition will also continue to be pursued. Business lines with sales of EUR 300 to 400 mn in fiscal year 2023 that are no longer part of our core business are to be sold or no longer pursued, and two business units in the Semiconductors segment will be merged to create a leaner structure. In total, the segment will comprise two business units, instead of the three it previously had. As a result, the overall responsibility of our business units has also been strength- ened. As a result of strengthening our business units, it was also possible to reduce the number of members on our Management Board. Since January 1, 2024, our Management Board has consisted of the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Our corporate culture and accountability are consistently aligned with overall profitability and the monetization of innovations. In addition, the Company's medium-term financial and growth targets have been adjusted. Due to a capital increase of EUR 827 mn (before transaction costs) and the refinancing of bonds, debt was reduced, and a more balanced maturity profile of outstanding interest-bearing liabilities was also achieved. All in all, the above measures provide a solid basis for structural growth in our core business with intelligent emitter and sensor components for the automotive, industrial and medical technology markets, as well as selected consumer applications.

2. Business results

2.1 Revenues

Consolidated revenues fell by 25 % to EUR 3,590 mn in fiscal year 2023, compared to EUR 4,819 mn in 2022. The Semiconductors segment accounted for EUR 2,425 mn of that figure (2022: EUR 3,167 mn), which equates to a 68 % share in sales (2022:

66 %). The Lamps & Systems (L&S) segment contributed EUR 1,165 mn (2022: EUR 1,652 mn) to consolidated revenues, equating to a 32 % share of sales (2022: 34 %).

The decline in consolidated revenues is due in particular to portfolio effects from the sale of business activities in the segment Lamps & Systems and the lower demand for semiconductor products, especially in our consumer applications business. In our consumer business, the end of product cycles for products that made major contributions to revenues in previous years had a perceptible impact. Adjusted for portfolio effects (on a 'constant perimeter basis'), revenues amounted to EUR 3,477 mn (2022: EUR 4,233 mn), equating to a decrease of 18 %. 'Constant perimeter basis' means that the Group structure is shown as of December 31, 2023. As a result, revenues from business activities sold in fiscal years 2023 and 2022, or held for sale as of the reporting dates, are eliminated. The sales of business activities in fiscal year 2023 related to the remaining Digital Systems (DS) business in Europe and Asia, the automotive lighting systems business (AMLS Italy), and Clay Paky S.p.A. In fiscal year 2022, the automotive lighting systems business (AMLS excluding Italy), Fluence Bioengineering, Inc., and Traxon Technologies were sold.

Revenues breakdown by segment
68 % Semiconductors	32 % Lamps & Systems

		% of		% of
in mn EUR	2023	revenues	2022	revenues	Change in %
Semiconductors	2,425	68 %	3,167	66 %	-23 %
Lamps & Systems	1,165	32 %	1,652	34 %	-29 %
	3,590		4,819

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Revenues breakdown by region

The breakdown of revenues by region reflects the location of the invoice recipient.

		% of		% of
in mn EUR	2023	revenues	2022	revenues	Change in %
EMEA	1,053	29 %	1,455	30 %	-28 %
Americas	755	21 %	849	18 %	-11 %
Asia / Pacific	1,783	50 %	2,515	52 %	-29 %
	3,590		4,819

50 % Asia / Pacific

29 % EMEA

21 % Americas

Revenues generated in EMEA fell to EUR 1,053 mn, down from EUR 1,455 mn in the previous year, due to the deconsolidation of our Digital Systems (DS) business in fiscal year 2023 and lower demand for semiconductor products, particularly in the area of consumer applications. Revenues in North and South America fell by EUR 94 mn to EUR 755 mn as a result of the deconsolidation of Fluence Bioengineering, Inc.

in fiscal year 2022. Revenues in the Asia/Pacific region fell to EUR 1,783 mn, down from EUR 2,515 mn in the previous year. The decline in revenues is also primarily due to the deconsolidation of our Digital Systems (DS) business and lower demand for semiconductor products, particularly in the area of consumer applications.

2.2 Earnings

in mn EUR	2023	2022	Change in %
Revenues	3,590	4,819	-25 %
Cost of sales	-2,750	-3,561	-23 %
Gross profit	840	1,258	-33 %
Gross margin - IFRS reported	23 %	26 %
Gross margin - adjusted	29 %	31 %

Gross profit decreased to EUR 840 mn in fiscal year 2023, compared to

EUR 1,258 mn in the previous year, mainly due to portfolio effects from disposals and lower demand for semiconductor products, particularly in the area of consumer applications.

Adjusted for acquisition-related expenses, transformation costs and expense for share-based compensation, the adjusted gross profit margin for the full fiscal year 2023 decreased to 29 %, compared to 31 % in the previous year. The reported gross profit margin reported in accordance with IFRS fell to 23 %, compared to 26 % in the previous year. The change in margin was influenced by lower capacity utilization at our semiconductor plants as compared with the previous year. Furthermore, the gross profit margin in the year under review was negatively impacted by impairment losses on property, plant and equipment amounting to EUR 65 mn (2022: EUR 102 mn). In the 2023 fiscal year, EUR 60 mn of this was attributable to impairment losses following the expiration of customer contracts in Singapore.

in mn EUR	2023	2022	Change in %
Research and development expenses	-480	-630	-24 %
Selling, general and administrative expenses	-501	-608	-18 %

As in the previous year, research and development expenses accounted for 13 % of revenues. The absolute amount fell to EUR 480 mn, down from EUR 630 mn in the previous year. This is primarily due to the recognition of government grants of EUR 50 mn (2022: EUR 25 mn), lower personnel expenses, and the outsourcing of activities to R&D partners. The long-term target for research and development expenses is 11-14 % of revenues.

Selling, general, and administrative expenses fell to EUR 501 mn, down from EUR 608 mn in the previous year. Their share in comparison to the revenues rose from 13 % to 14 % as a result of the decrease in revenues. Additional measures to adjust our cost base are planned as part of the 'Re-establish the Base' Program.

in mn EUR	2023	2022	Change in %
Result from operations (EBIT) - IFRS reported	-1,430	-161	789 %
EBIT margin - IFRS reported	-40 %	-3 %
Result from operations (EBIT) - adjusted	233	407	-43 %
EBIT margin - adjusted	7 %	8 %

Result from operations (EBIT) - adjusted	233	407	-43 %
Amortization, depreciation and impairment
(excluding acquisition-related expense)	370	446	-17 %
EBITDA - adjusted	604	853	-29 %

The result from operations (EBIT), adjusted for goodwill impairment, acquisition-­ related expenses, asset restructuring, transformation costs, expenses for share- based payments, and the result from investments in associates and from the sale of businesses, fell by EUR 174 mn to EUR 233 mn compared to the previous year. Reported EBIT according to IFRS fell by EUR 1,269 mn to EUR -1,430 mn, primarily due to impairment of goodwill totaling EUR 1,313 mn (2022: EUR 277 mn), which was attributable to BU OS (EUR 1,019 mn) and BU AOS (EUR 294 mn) and resulted from adjustments to business plans due to lower long-term market expectations.

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EBITDA amounted to EUR 463 mn compared to EUR 857 mn in the previous year. Adjusted EBITDA fell by EUR 249 mn to EUR 604 mn compared to the previous year.

in millions of EUR	2023	2022	Change in %
Financial income	62	25	151 %
Financial expenses	-233	-225	4 %
Net financial result	-171	-201	-15 %

The net financial result improved from EUR -201 mn to EUR -171 mn. The improvement is attributable to a EUR 9 mn increase in interest income as a result of higher interest on credit balances and a EUR 18 mn reduction in interest expenses, which was due in particular to the capitalization of interest on borrowed capital in the amount of EUR 10 mn in fiscal year 2023 as part of the acquisition costs of property, plant and equipment and intangible assets in connection with the construction of the semiconductor production facilities for LEDs and microLEDs in Kulim, Malaysia, and in Regensburg, Germany.

Another effect was the valuation of options for the early repayment of bonds, which led to income of EUR 5 mn in fiscal year 2023 and related to the bonds issued at the end of November 2023. As of December 31, 2022, however, the options for the early repayment of the bonds repaid in December 2023 did not have a positive fair value, which led to a negative valuation effect of EUR 25 mn in fiscal year 2022. In fiscal year 2023, a countervailing expense of EUR 13 mn occurred from the early repayment of those bonds, however, which resulted from the difference between the repayment amounts and the carrying amounts at the time of repayment.

Currency effects and valuation effects from derivatives impacted the change in the net financial result by EUR -14 mn. The positive currency effects of EUR 2 mn in the previous year were contrasted by negative currency effects of EUR 38 mn in the year under review. Accordingly, income from derivatives, which are mainly foreign currency derivatives for hedging purposes, was higher in the year under review, at EUR 33 mn, than in the previous year, at EUR 8 mn. In fiscal year 2023, income from derivatives includes an offsetting expense of EUR 19 mn from a currency hedge for the capital increase. The hedge transaction was used to hedge currency risks relating to differences in the CHF rate between the time the ­subscription price of the new shares (CHF 1.07 per share) was set and the payout was effected.

in millions of EUR	2023	2022	Change in %
Current taxes	-59	-84	-30 %
Deferred taxes	47	2	2,250 %
Income taxes	-12	-82	-85 %

Income taxes amounted to EUR 12 mn in fiscal year 2023, following tax expenses of EUR 82 mn in the previous year. The actual income taxes of EUR -59 mn (2022: EUR -84 mn) mainly resulted from the foreign companies that were profitable due to the global transfer pricing system. Deferred taxes had a net positive effect totaling EUR 47 mn (2022: EUR 2 mn), which is attributable in particular to the change in deferred tax assets on tax loss carryforwards.

The net result amounted to EUR -1,613 mn, compared to EUR -444 mn in the previous year. As described above, this development was caused, among other things, by one-off special effects, in particular impairment losses on goodwill, and property, plant and equipment. The return on equity was -85 % (2022: -16 %), while the return on revenues was -45 % (2022: -9 %).

in millions of EUR	2023	2022	Change in %
Gross profit	840	1,258	-33 %
Gross margin - IFRS reported	23 %	26 %
Gross margin - adjusted	29 %	31 %
EBITDA (IFRS)	463	857	-46 %
EBITDA - adjusted	604	853	-29 %
Result from operations (EBIT) - IFRS reported	-1,430	-161	789 %
EBIT margin - IFRS reported	-40 %	-3 %
Result from operations (EBIT) - adjusted	233	407	-43 %
EBIT margin - adjusted	7 %	8 %
Financial result	-171	-201	-15 %
Result before income taxes	-1,601	-361	343 %
Net result	-1,613	-444	263 %
Net result - adjusted	50	124	-60 %
Return on equity	-85 %	-16 %
Return on revenues	-45 %	-9 %

The gross margin (adjusted) is based on gross profit adjusted for goodwill impair- ment, acquisition-related expenses, asset restructuring, transformation costs, and expense for share-based compensation.

The result from operations (EBIT, adjusted) and EBIT margin (adjusted) are additionally adjusted for the result from investments in associates and from the sale of businesses, which are included in the result from operations (EBIT, IFRS).

EBITDA (adjusted) is derived from EBIT (adjusted) by adding non-acquisition and non-transformation-related depreciation, amortization and impairment losses.

The net result (adjusted) is based on the result from operating activities (EBIT,

adjusted)­ and takes into account the financial result and income taxes.

Acquisition-related expenses include depreciation, amortization and impairment losses on assets from purchase price allocations, as well as integration, carve-out, and acquisition costs.

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Asset restructuring includes costs incurred in connection with the consolidation of our production sites, as well as impairment losses on technical equipment and ma-

Reconciliation of adjusted financial figures to the financial figures reported in accordance with IFRS:

2.3 Assets and Financial Position

chinery.

Transformation costs result primarily from necessary measures to improve our competitiveness and cost position, as well as efficiency measures and other restructuring expenses.

in millions of EUR	2023	2022
Gross profit - adjusted	1,031	1,470
Acquisition-related expense	-82	-82
Asset restructuring	-65	-102
Share-based compensation	-9	-2
Transformation costs	-35	-25
Gross profit - IFRS reported	840	1,258
Operating expenses - adjusted	-798	-1,063
Goodwill impairment	-1,313	-277

Assets
in millions of EUR	2023	2022
Inventories	716	864
Trade receivables	470	533
Other current assets	1,434	1,487
Non-current assets	4,710	5,879
Deferred tax asset	72	69
Total assets	7,401	8,832

Equity and liabilities
in millions of EUR	2023	2022
Interest-bearing loans
and borrowings	2,458	2,803
Trade liabilities	572	811
Other liabilities	2,041	1,904
Provisions	425	480
Equity	1,905	2,833
Total equity and ­liabilities	7,401	8,832

Acquisition-related expense	-71	-144
Share-based compensation	-40	-38
Result from the sale of businesses	18	155
Transformation costs	-43	-48
Results from investments accounted for using the equity method, net	-24	-4
Operating expenses - IFRS reported	-2,270	-1,419
Result from operations (EBIT) - adjusted	233	407
Goodwill impairment	-1,313	-277
Acquisition-related expense	-152	-226
Asset restructuring	-65	-102
Share-based compensation	-49	-41
Result from the sale of businesses	-78	-73
Transformation costs	18	155
Results from investments accounted for using the equity method,
net	-24	-4
Result from operations (EBIT) - IFRS reported	-1,430	-161
Result from operations (EBIT) - adjusted	233	407
Amortization, depreciation and impairment
(excluding acquisition-related expense)	370	446
EBITDA - adjusted	604	853
Result from operations (EBIT) - adjusted	233	407
Financial result	-171	-201
Income taxes	-12	-82
Net result - adjusted	50	124

The balance sheet has a high ratio of non-current assets to total assets, which is common in the semiconductor industry. At the same time, the intangible assets reflect the significant acquisitions carried out in recent years. At 57 %, the proportion of total assets accounted for by property, plant, and equipment and by intangible assets was slightly lower than the prior-year figure of 62 %.

Cash-effective capital expenditure on non-current assets (CAPEX) amounted to EUR 1,049 mn, or 29 % of revenues (2022: 11 %). Amortization, depreciation and impairments of EUR 1,892 mn (2022: EUR 1,018 mn) included scheduled non-acquisition and non-transformation-related amortization and depreciation totaling EUR 370 mn (2022: EUR 446 mn). The ratio of non-current assets to equity decreased to around 45 % at the end of the fiscal year 2023, compared to 52 % in the previous year. Non-current assets include deferred tax assets of EUR 72 mn (2022: EUR 69 mn).

Inventories decreased to EUR 716 mn, down from EUR 864 mn in the previous year, in particular due to measures to optimize working capital and the sale of our automotive lighting systems business (AMLS Italy). Trade receivables amounted to EUR 470 mn as of the reporting date (2022: EUR 533 mn).

Assets held for sale amounted to EUR 3 mn and include the assets of OSRAM Russia. Assets held for sale of EUR 157 mn as of December 31, 2022 comprised the assets of Digital Systems (DS) in Europe and Asia, and Clay Paky S.p.A., as well as the investments in Unternehmertum VC Fonds II GmbH & Co. KG and Partech Partners S.A.S, all of which were sold during fiscal year 2023.

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The increase in property, plant and equipment (after taking into account government grants) to EUR 1,997 mn (2022: EUR 1,856 mn) is mainly due to the construction of the LED-semiconductor manufacturing plant in Kulim (Malaysia), and the investments in Premstaetten (Austria) to expand our CMOS production capacity. The carrying amount of assets under construction and advance payments on property, plant and equipment increased by EUR 364 mn to EUR 973 mn (2022: EUR 609 mn). Intangible assets amounted to EUR 2,249 mn (2022: EUR 3,645 mn). The change resulted mainly from impairment losses on goodwill in the amount of EUR 1,313 mn, as well as from the scheduled amortization of assets capitalized in connection with the acquisition of OSRAM.

Interest-bearing loans and borrowings decreased by EUR 345 mn (2022:

EUR 323 mn) to EUR 2,458 mn (2022: EUR 2,803 mn), mainly due to the full repayment of the bonds issued in 2020 with a nominal volume of EUR 850 mn and USD 450 mn, the carrying amount of which was EUR 1,271 mn as of December 31, 2022. In contrast, the carrying amount of the bonds issued at the end of November

2023 amounted to EUR 998 mn as of December 31, 2023, with nominal volumes of EUR 625 mn and USD 400 mn. In addition, the repayment of bank loans, which were only partially refinanced by taking out new loans, led to a net cash outflow of EUR 103 mn in fiscal year 2023. As interest-bearing loans and borrowings decreased by EUR 345 mn, while cash and cash equivalents increased by EUR 59 mn, net financial debt fell to EUR 1,312 mn, down from EUR 1,717 mn in the previous year. If the liability from the sale and leaseback financing of buildings at the newly constructed 8-inch semiconductor plant in Kulim (Malaysia) is also taken into account, net financial debt fell to EUR 1,696 mn, down from EUR 1,717 mn in the previous year.

Trade payables decreased to EUR 572 mn as of the reporting date (2022:

EUR 811 mn). The decrease is partly due to the fact that liabilities in connection with the construction of the building and manufacturing facilities for the semiconductor production of LEDs and microLEDs in Kulim, Malaysia, were significantly lower than at the end of the previous fiscal year. Measures implemented to optimize our net working capital also had an impact.

At the end of the year under review, there were no significant liabilities in connection with assets held for sale. As of December 31, 2022, such liabilities amounted to EUR 50 mn and related to the liabilities of Digital Systems (DS) in Europe and Asia, and Clay Paky S.p.A.

Group equity decreased by a total of EUR 928 mn to EUR 1,905 mn as of Decem- ber 31, 2023. As a result of the increase in capital, equity increased by EUR 797 mn net of transaction costs. Other changes mainly consist of the result after tax of EUR -1,613 mn, and other comprehensive income of EUR -152 mn, which includes currency effects from the euro translation of foreign subsidiaries of EUR -118 mn that arose as a result of the appreciation of the euro against other currencies, in particular the US dollar.

The debt to equity ratio was 129 % (2022: 99 %), and the equity ratio was 26 % (2022: 32 %).

For information on financial instruments and changes in equity, please refer to the disclosures in the notes to the consolidated financial statements.

	2023	2022
Equity ratio	26 %	32 %
Debt to equity ratio	129 %	99 %
Equity to fixed assets ratio	45 %	52 %
Net debt	1,312	1,717
Net debt including liabilities from a sale-and-leaseback financing
transaction	1,696	1,717

The above performance indicators are derived directly from the consolidated financial statements. The equity ratio is calculated as the share of equity in the balance sheet total. The equity to fixed assets ratio expresses the proportion of the carrying amounts of property, plant and equipment and intangible assets that is financed by equity. Net debt is calculated from the carrying amounts of current and non-currentinterest-bearing loans and borrowings less cash and cash equivalents. In addition to interest-bearing loans and borrowings, net debt including sale and leaseback financing also includes the liability from the sale and leaseback financing of buildings at the newly constructed 8-inch semiconductor plant in Kulim (Malaysia).

2.4 Cash Flow

in millions of EUR	2023	2022	Change in %
Cash flows from operating activities	674	599	13 %
Cash flows from investing activities	-826	-164	403 %
Free cash flow	-151	443	-134 %
Cash flows from financing activities	245	-745	133 %
Effects of changes in foreign exchange rates on
cash and cash equivalents	-45	69	-166 %
Cash and cash equivalents	1,146	1,087	5 %

The definition of free cash flow was changed as of December 31, 2023. It now includes cash flows from operating activities, payments for the acquisition of intangible assets and property, plant and equipment, inflows from the sale of financial as- sets, intangible assets and property, plant and equipment, and inflows from the sale of businesses, net of cash and cash equivalents disposed. The comparative figure for fiscal year 2022 was adjusted in line with the new definition. As part of a change in presentation in the consolidated cash flow statement compared to the previous year, payments for the acquisition of shares in OSRAM Licht AG, which were previously reported as part of the line item acquisition of subsidiaries, net of cash and cash equivalents acquired within cash flows from investing activities, are now reported in a separate line within cash flows from financing activities. This led to a reduction of EUR 19 mn in cash flows from financing activities and had an offsetting effect in cash flows from investing activities.

in millions of EUR	2023	2022	Change in %
Cash flows from operating activities	674	599	13 %

Cash flows from operating activities increased to EUR 674 mn, up from EUR 599 mn in fiscal year 2022. This was due to the release of funds under current assets and liabilities of EUR 242 mn (2022: EUR 44 mn). As a result of measures implemented to optimize current assets, funds released amounted to EUR 96 mn for inventories, while funds of EUR 30 mn were tied up here in the previous year. The positive effect on other liabilities of EUR 175 mn resulted from a supply chain financing program initiated by ams OSRAM for trade payables in the amount of EUR 190 mn. The pro-

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gram, which was utilized for the first time in the first quarter of fiscal year 2023, includes EUR and USD liabilities. Another positive effect on cash flows from operating activities was a return of funds of EUR 31 mn from a trust fund in Germany, as trust assets in that amount were replaced by a bank guarantee.

in millions of EUR	2023	2022	Change in %
Cash flows from investing activities	-826	-164	403 %
therein:
Additions to intangible assets and property,
plant, and equipment	-1,049	-537	95 %
Inflows from sale of investments, intangible
assets, and property, plant and equipment	134	346	-61 %
Inflows and payments from disposals of
businesses, net of cash and cash equivalents
disposed	90	34	163 %

Cash flows from investing activities amounted to EUR -826 mn (2022: EUR -164 mn). Investments in intangible assets and property, plant and equipment amounted

to EUR -1,049 mn (2022: EUR -537 mn). The development is mainly due to the EUR 512 mn increase in investments in intangible assets and property, plant and equipment, including in particular investments in connection with the construction of the semiconductor manufacturing facilities for LEDs and microLEDs in Kulim, Malaysia, and in Regensburg, Germany, as well as the expansion of manufacturing capacities for CMOS products in Premstaetten, Austria. Payments of EUR 7 mn for acquisitions in fiscal year 2022 related to the acquisition of a further 70 % of the shares in 7Sensing Software BV, Belgium (7Sensing), which accordingly became a subsidiary.

The net cash provided by the sale of business activities amounted to EUR 134 mn (2022: EUR 346 mn), which in particular included Digital Systems (DS) Europe and Asia (EUR 74 mn), our automotive lighting systems business (AMLS Italy:

EUR 39 mn), and Clay Paky S.p.A. (EUR 17 mn). In fiscal year 2022, EUR 251 mn was attributable to Fluence Bioengineering Inc., EUR 85 mn to Automotive Lighting Systems (AMLS), and EUR 10 mn to Traxon Technologies (Traxon). In fiscal year 2023, proceeds from the sale of investments, intangible assets, and property, plant and equipment, include EUR 41 mn from the sale of a plant in Singapore in the Tampines district (including taxes received), EUR 17 mn from a sale and leaseback transaction

for a property in Plano, Texas, USA, and EUR 10 mn from the sale of investments in two funds (Unternehmertum VC Fonds II GmbH & Co. KG, and Partech Entrepreneur Fund III FPCI).

Free cash flow came to EUR -151 mn (2022: EUR 442 mn). The Company's available liquidity in the form of cash and cash equivalents increased by EUR 59 mn to EUR 1,146 mn in 2023. As of December 31, 2023, ams OSRAM had unused committed credit lines from banks in the amount of EUR 1,006 mn (2022: EUR 1,026 mn).

in millions of EUR	2023	2022	Change in %
Cash flows from financing activities	245	-745	133 %
therein:
Inflows from issuance of common stock	827
Inflows from issuance of bonds	981
Transaction costs from the issuance of
common stock and bonds	-56
Repayment of bonds	-1,288
Interest paid	-181	-125	45 %
Inflows from a sale and leaseback financing	382
Acquisition of non-controlling interests in
OSRAM Licht AG	-232	-19	1,134 %

Cash flows from financing activities amounted to EUR 245 mn in the year under review (2022: EUR -745 mn), which includes EUR 827 mn (before transaction costs) from the issue of 724,154,662 new no-par value bearer shares in ams-OSRAM AG. The inflows from the issue of bonds (EUR 981 mn before transaction costs) result from the two bonds issued at the end of November 2023, an EUR bond with a nominal volume of EUR 625 mn, and a USD bond with a nominal volume of USD 400 mn. The proceeds were used to repay the bonds issued in July 2020 with a nominal volume of EUR 850 mn and USD 450 mn, for which a total of EUR 1,288 mn was accrued. Interest paid rose from EUR 125 mn to EUR 181 mn. The increase was due in particular to the fact that the early repayment of the bonds resulted in the payment of accrued interest that would otherwise not have been due until the next interest payment date at the beginning of fiscal year 2024.

In fiscal year 2023, cash flows from financing activities also include EUR 382 mn from a sale and leaseback transaction, which constitutes a financing transaction.

The amount of EUR 232 mn (2022: EUR 19 mn) was paid for the acquisition of shares in OSRAM Licht AG. As a result, the participation held by ams-OSRAM AG in OSRAM Licht AG increased from 80.35 % to 85.76 % as of December 31, 2023.

ams OSRAM Annual Report 2023	68

			To our Shareholders	Our Company	Supervisory Board Report	Corp. Governance	Remuneration Report	Management Report	Group Financial Statements

3. Research and development

The Group's 41 development sites are globally positioned, with LED development in Germany and Malaysia, packaging development in Malaysia, China, Singapore and Germany, and micro-optics in Switzerland and Singapore. Conversion solutions, optical coatings and filter solutions, image and color sensor technology are developed in the USA and Europe, while IC design and development take place in India, the USA, Italy, Spain, Austria, and Switzerland. This global network and associated leading expertise give ams OSRAM a strategic advantage.

As one of the technological leaders in the development and production of high-quality sensor and lighting technologies for use in automotive lighting, industrial appli- cations, medical diagnostic technology and mobile devices, ams OSRAM's expertise is based on intensive research and development activities. In order to secure and expand its strong market position, ams OSRAM invests heavily in research and de- velopment. Research and development expenses amounted to EUR 480 mn (13 % of revenues) in fiscal year 2023, compared with EUR 630 mn (13 % of revenues) in fiscal year 2022. The average number of employees working in R&D was 3,144 in 2023, compared with 3,453 in 2022.

ams OSRAM's R&D activities mainly comprise optical technologies for applications involving sensors, lighting, and visualization. Our broad technology portfolio serves the automotive, industrial, medical, and consumer end markets. Furthermore, the development of software and algorithms and the integration of machine learning and artificial intelligence are now an integral part of ams OSRAM's R&D activities.

One focus of development in the reporting period was microLED technology, which is characterized by microscopically small LEDs that form individual light points/pixels and can be combined to form high-resolution displays. Future areas of application include televisions, automotive head-up displays, and wearables. In particular, the technology allows for more vibrant colors, a high contrast ratio, improved display performance in unfavorable lighting conditions, and lower relative energy consumption for improved efficiency. In connection with the development of microLED technology and the construction of the industry's first 8-inch LED manufacturing facility in Kulim (Malaysia), ams OSRAM entered into a funding agreement with the Malay- sian Investment Department Authority (MIDA) in fiscal year 2023. The cooperation agreement includes funding for investments in buildings and technical equipment, in development activities and high-tech jobs. Due to the unexpected cancellation of a

customer project in the context of microLED technology at the end of February 2024, the strategy regarding microLED is currently being reassessed.

In 2023, ams OSRAM launched a variety of new LED and laser products that improve performance, expand end-device design possibilities, and enable new applications. The ALIYOS LED-on-Foil technology enables unprecedented effects in automotive lighting due to its transparency, minimal thickness, and 2.5D bendability. With the intelligent multi-pixel EVIYOS 2.0 LED, ams OSRAM is ushering in a new era of automotive lighting and road safety. The fifth generation of OSLON Square Hyper Red LEDs underlines the market leadership with particularly high energy efficiency in plant cultivation / greenhouse lighting, which contributes to sustainable agriculture. Automotive-gradenear-infrared VCSELs, which project flood and dot patterns and thus enable 3D sensor applications in vehicle interiors, complement our VCSEL port- folio. Our new multi-LED package, which enables more accurate heart rate and SpO2 measurements in wearables, increases total radiant intensity by more than 40 percent and green radiant intensity by more than 100 percent. In addition, our portfolio of flat, ultra-bright projection LEDs has been expanded to include the colors red, true green, and blue, in order to make image processing systems or stage lighting slimmer and more powerful.

Also in 2023, ams OSRAM once again confirmed its position as a market and technology leader in optical sensors, high-performance ambient lighting and color sen- sors, as well as spectroscopy, the core elements of which are state-of-the-art CMOS ICs with further improved integrated photodiodes, combined with optical filters and diffusers manufactured using the thin-film process. The combination of hybrid optical filter technologies and highly sensitive photodiodes and chip-scale packaging solutions enables very finely tuned and brilliant displays for smartphones, wearables, and automotive applications. Thanks to the latest optical packaging technologies, the sensors meet performance and robustness requirements for innovative consumer applications, such as data glasses for augmented reality and virtual reality. Improved III/V semiconductor photodiodes and their optical coatings also extend the wavelength range of multispectral sensors, allowing for products for material anal- ysis. The new image sensors combine industry-leading high performance with low power consumption, providing greater flexibility for manufacturers of data glasses and other products with limited installation sizes. In medical imaging, ams OSRAM's fast and ultra-low noise solutions provide unprecedented image quality and reduced radiation exposure. They also form the basis of upcoming photon-counting

technology,­ which will enable even greater resolution in computed tomography. In the field of vehicle front lighting, ams OSRAM has also developed and launched a new type of intelligent multi-pixel LED that enables fully adaptive, dynamic headlight operation and image projection at the same time.

Close strategic coordination between our business units, strategy department, and R&D management continuously improves our innovation processes and determines our strategic decisions on technology and product development. Collaboration takes place, for example, through research programs supported by the European Commission, as well as country-specific funding programs around the world. For example, the 'OptoSuRe' Program, which is publicly funded by the German Federal Government (i.e. the Federal Ministry of Economics and Climate Protection) and the Free State of Bavaria, promotes the further development of semiconductor technol- ogy. IPCEI (Important Project of Common European Interest) funding also supports ams OSRAM in its own investments in research and development focused on innovative optoelectronic components. As part of our approach to working with strategic partners, we also collaborate with leading research institutes, universities, and other partners worldwide.

The creation, maintenance, enforcement and use of patents, trademarks, and other intellectual property rights is an important aspect of our strategy to differentiate ourselves in the marketplace and to protect and monetize our R&D investments. Our global patent portfolio comprises around 13,600 patents and patent applications, corresponding to approximately 5,200 patent families.

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			To our Shareholders	Our Company	Supervisory Board Report	Corp. Governance	Remuneration Report	Management Report	Group Financial Statements

4. Purchasing and manufacturing 5. Employees

6. Environmental management

While the procurement situation in the previous year was characterized by persistent imbalances in the semiconductor and other supply chains, fiscal year 2023 was hardly characterized by procurement bottlenecks and the associated burdens. Overall, cost savings were achieved in the procurement of materials, semi-finished products and services in fiscal year 2023. However, market price trends for electricity, precious metals and industrial gases counteracted the savings achieved through price negotiations and productivity projects.

As of December 31, 2023, the ams OSRAM Group had 18 production sites worldwide. As of December 31, 2022, there were 20 production sites, excluding the Clay Paky production site, which was reported as an asset held for sale in the balance sheet as of December 31, 2022. In addition to Clay Paky, the decline resulted from the sale of the plant in Treviso (Italy) in connection with the sale of our Italian automotive lighting systems business to the Flex-n-Gate Group, in Urbana, USA. Our production sites are located in Premstaetten (Austria), Regensburg, Herbrechtingen (both in Germany), Singapore, Wuxi (China), Penang and Kulim (both in Malaysia), Antwerp (Belgium), Nové Zámky (Slovakia), Hillsboro (New Hampshire, USA), Exeter (New Hampshire, USA), Calamba City (Philippines), and elsewhere. Of the two existing plants in Singapore, one plant in the Tampines district was sold in fiscal year 2023.

Capacity utilization at our semiconductor plants was lower overall than in the previous year. In the second half of 2023, capacity utilization improved compared to the first half of the year and followed the sales trend in corresponding end markets. Investments included the construction of the industry's first 8-inch LED manufacturing facility in Kulim (Malaysia) for front-end semiconductor production of LEDs and microLEDs, which began in 2022, and associated investments for a pilot plant in Regensburg (Germany). Investments are also being made to expand our manufacturing site in Premstaetten (Austria) to increase internal CMOS capacity. The move should provide ams OSRAM with better opportunities to respond more quickly and flexibly to increased demand and reduce the risk of dependence on external produc- ers, allowing us to strengthen our manufacturing processes and improve profitability over the long term.

Our employees form the foundation for our long-term business success and create the added value ams OSRAM wants to offer its customers. It is important to us to offer our employees a long-term job with appealing working conditions and pros- pects, to contribute to their development, and to pay them fairly. Furthermore, as a globally active company, the diversity of our employees is a major concern for us. As of December 31, 2023, the ams OSRAM Group had 20,378 employees (2022: 22,461). The average number of employees for the year was 20,530 (2022: 23,322), based on FTEs (full-time equivalents).

At ams OSRAM, we are aware of our responsibility as an important employer in the regions where we operate. Accordingly, we continued to offer comprehensive internal and external training and development opportunities for all of our employee groups during the past year, and are committed to training apprentices in various profes- sions.

We seek to retain our employees by offering an attractive, long-term remuneration concept. A profit-sharing program for all ams OSRAM employees adds an attractive direct component to our existing stock option plans and employee remuneration programs. Our profit-sharing program embodies the belief that our employees are the most important factor in the success of our company by rewarding the joint contribution of all of our employees to ams OSRAM's success.

Based upon earnings performance in the previous fiscal year, a profit-sharing bonus for fiscal year 2022 was paid to employees in the amount of EUR 6 mn in 2023 (2022: EUR 16 mn for fiscal year 2021). The amount of the bonus is determined on the basis of adjusted earnings after tax.

In addition, active internal company and employee communication as well as recurring employee events - a long-standing company tradition - support employee identification with the Company. Such events include dialog formats such as town hall meetings or webcasts given by our Management Board and other management representatives. ams OSRAM also conducts employee surveys to obtain feedback from employees. Following an initial survey in 2022, another survey is planned for 2024. The findings are to be used as a basis for developing measures aimed at increasing ams OSRAM's attractiveness as an employer and improving employee satisfaction.

As an industrial company, ams OSRAM consumes natural resources and causes greenhouse gas emissions at its production facilities. In order to meet our environmental responsibilities, we have committed to conserving resources through environmental management and to developing innovative and energy-efficient products, and have developed a climate strategy that is in line with the Paris Climate Agreement. Through that strategy, we firstly aim to achieve CO2 neutrality in our own value creation (Scope 1 and 2)1 by 2030. Secondly, we aim to reduce emissions in the 'purchased goods and services' category of our supply chain (Scope 3) by 47.5 % per euro of value added by 2030, and by 97 % per euro of value added by 2050, compared to our base year 2021. As part of our environmental reporting, we also collect data on energy consumption, greenhouse gas emissions, water abstraction, and waste generation.

The ways in which we implement environmental management and address other aspects of sustainability are described in a separate sustainability report, which can be found at: >>https://ams-osram.com/about-us/sustainability/sustainability-­reporting.In addition to describing our organizational structure, responsibilities, guidelines and processes, the report also explains the specific goals, measures, and results relating to all topics of importance to ams OSRAM.

1 ams OSRAM bases the measuring and reporting of its greenhouse gas emissions on the recognized standard of the

Greenhouse Gas (GHG) Protocol, which classifies greenhouse gas emissions into three scopes, among others, as well as the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The GHG Protocol creates a comprehensive, globally standardized framework for the measurement and management of green- house gas (GHG) emissions from the private and public sectors, from value chains, and from measures to reduce emissions.

ams OSRAM Annual Report 2023	70