Osram announced by raising the share of semiconductor sales from the global general lighting market could help it reduce the total cost of producing chips for LEDs at its new factory to be opened in Malaysia, reported Bloomberg.

The LED company announced last month it will spend EUR 3 billion (US $3.3 billion) on R&D and establishing a new LED chip plant in Southeast Asia. Although, the move attracted heavy criticism from investors, the company explained the move could drive down overall LED chip costs for lighting applications.

“General lighting has lower profitability, but we think that we can make this up with synergy effects,” Aldo Kamper, head of Osram’s Opto Semiconductor division, said on Monday at a factory in Regensburg, Germany.

Osram Opto plans to double its semiconductor sales used in outdoor and other general lighting applications to about a third of its revenue by 2020, said Kamper. Scaled up LED chip production could reduce the manufacturing costs and keep the semiconductor operating margin to 15 percent on average in the medium term.

Although, profit margins for general lighting end market remains lower than specialized automotive or electronic industries, the higher sales volume will enable Osram to reduce the manufacturing costs for LED chips, said Kamper. This is expected to generate higher profitability from sales to customers in the more specialized markets.