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Philips Semiconductors to close trailing edge fabs

Posted: 17 Sep 2002 ?? ?Print Version ?Bookmark and Share

Keywords:philips? fab? dvd recorder? ic? mobile phone?

With no significant near-term market improvement in sight and declining chip sales in Q3, Philips Semiconductors is likely to close some "trailing edge" fabs and lay off some people, according to CEO Scott McGregor.

Speaking to EETimes on the same day (Sept. 12) that he participated in a meeting with investors and financial analysts in Amsterdam intended to outline the company's strategy for a return to profitable growth, McGregor said fab utilization is unlikely to top 55 percent to 60 percent in both Q3 and Q4 this year.

"We need to bring capacity more in line with market demand," said McGregor. The CEO declined to give details of the company's shutdown plans, since the company will make a final decision in October. Taking the dramatic step of going totally fabless is not in their cards, but "we will continue to increase our percentage of outsourcing for products based on advanced process technologies." Meanwhile, the company is looking at the closure of "one or more sites using trailing edge technologies," McGregor said.

Plans to reduce the structural break-even point could cost Philips charges of approximately $200 million to $220 million in the next six months.

The Dutch electronics giant has cut its chip sales forecast for Q3 sharply, saying that revenues will drop by between 4 percent and 6 percent in U.S. dollars terms from Q2. This would still represent a 12 percent to 14 percent jump in sales from Q3 of 2001 but as recently as two months ago, according to reports, Philips was saying the Q3 semiconductor sales revenue would be flat to a decline of 5 percent compared with Q2.

The company, however, remains bullish on their customer focused design-in programs, which have recently earned them partnerships with two of the top four mobile handset vendors - Samsung and Siemens - and three Chinese mobile phone companies in the communication sector.

McGregor claimed: "By the end of next year, one in ten mobile phones in the world market will be based on Philips Semiconductors' Nexperia platform." That includes everything from RF, baseband processing to power management and display ICs to make up a mobile handset, he said.

Philips will continue to focus on the consumer sector, placing high hopes on the growing DVD recorder market in particular. Although Philips Semiconductors was late in the game in the DVD player market, thus missing a huge sales opportunity for its ICs, the company is now committed to capitalizing on its early lead in the DVD+RW recordable market. Philips Semiconductors is currently supplying an entire DVD recordable system solution, maintaining the number one position in the DVD+RW IC market, according to McGregor.

When asked about the economic forecast, McGregor said that the market in Q3 is not picking up as fast as many have hoped and the industry analysts have been revising their own forecasts repeatedly. He said: "Our strategy is to keep the structural break-even point down, so that even if the market does not grow, we can be profitable."

- Junko Yoshida

EE Times

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