Philips seeks buyer for manufacturing business

Dutch electronics giant Koninklijke Philips Electronic NV is seeking a buyer for its contract electronics manufacturing business, as part of a restructuring plan meant to stem huge losses. But observers say end users shouldn’t notice any difference in products or service.

Philips could dispose of the business, which makes circuit boards and other components for both Philips divisions and outside buyers, as part of its strategy to divest itself of noncore businesses, spokesman Ben Geert said Tuesday. He confirmed remarks of Philips Chief Executive Officer Gerard Kleisterlee published in Tuesday’s Wall Street Journal.

Geert declined to comment on a potential buyer, or on the amount such a sale might bring in.

The move is not a surprise, but Philips is a little late to follow other companies in unloading manufacturing businesses, said Andrew Norwood, a senior analyst at Dataquest Inc., a unit of Gartner Inc.

“It’s a trend that manufacturers have been following for some time-getting out of manufacturing entirely, the dirty end of the business. It’s much better for them to concentrate on design, marketing, things like that,” he said. “Philips is a slow-moving object, while some of its competitors are a bit more nimble on their feet.”

Philips’ end customers should not notice any difference in the Philips-branded products they buy, Norwood said.

“Things aren’t likely to change that dramatically,” he said. “Many items we buy today are not necessarily manufactured by the names that are on the front, even down to your washing powder.”

Geerts further confirmed that Philips is looking to acquire a “smaller chip maker,” though he again declined to give specifics.

“That would fill a gap in the portfolio of Philips Semiconductor (NV),” which is strongest in the areas of digitalization and automotive electronics, he said. He would not say what strengths the company is hoping to add, however, remarking only, “It depends on the opportunities that come along.”

Norwood noted that depressed values in the semiconductor industry make this a good time for Philips to acquire a company.

“If you’re going to buy a semiconductor maker and you’ve got money, now is obviously the time to do so. If it’s floated on the stock market, you can probably pick it up at a relatively discounted price. If it’s a private company, they’ll probably be glad for the interest and the infusion of capital,” he said.

According to Dataquest figures, Philips stands as the world’s 10th-largest semiconductor maker, with annual revenue of some US$4.4 billion. It is dwarfed by number-one Intel Corp., at US$23 billion. Norwood said that if other manufacturers hadn’t been pushed out of the top ten by the current slump in DRAM (dynamic RAM) prices, Philips, which does not make DRAM products, wouldn’t make the list.

“In a couple of years’ time it won’t be quite so big and attractive, so if they’re looking to do some deals, Philips has a good ranking at the moment, not necessarily in the future,” he said.

Koninklijke Philips Electronics NV, in Amsterdam, can be reached at +31-20-597-7777 or