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Philips Semiconductors to shed product units

Posted: 10 May 2005 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? philips mobile display systems?

In parallel with a corporate reorganization announced earlier this week, Philips Semiconductors said it is shedding nonstrategic product units, layers of management bureaucracy and overhead costs.

Among the product groups dropped by Philips Semiconductors is Philips Mobile Display Systems. The chip maker said it will cease production of standalone scalers and imaging modules.

Philips Semiconductor CEO Frans van Houten told EE Times the goal of the reorganization - his first major management step since becoming CEO last fall - is to align its portfolio, bringing business groups closer to applications and providing customers with a single point of contact for system solutions.

Although layoffs are also expected, van Houten stressed that payroll reductions are "not the main goal" of the reorganization. He declined to comment on how many jobs may be affected.

The company was previously divided into seven units - automotive, consumer, communications, computing and network appliances, connectivity, identification and multimarket semiconductors. It will now consists of four: automotive and identification, mobile and personal, home and multimarket semiconductors.

Van Houten said engineers from Royal Philips Electronics' system division have been transferred to Philips Semiconductors to build systems for its ODMs. While its technology strategies based on its Nexperia platforms remain intact, van Houten said the regrouping will help accelerate development of application-focused system solutions.

As technology convergence grows in digital consumer electronics, so has confusion among Philips' customers, who are forced to deal with many different business units. Previously, customers manufacturing a product requiring a video processor, connectivity, computing and graphics chips would have to deal with several different business units within Philips Semiconductors. "We want to provide our customers a one-stop shop," said van Houten. "We will keep the complications internal."

The realignment also reinforces goals spelled out earlier this year by Gerard Kleisterlee, president and CEO of Royal Philips Electronics. Kleisterlee said he expected "more predictable performance" by the chip division, achieving a "5 to 15 percent income from operations," van Houten added.

Under the new structure, the Mobile Display Systems unit will report directly to Royal Philips Electronics. Said van Houten, "I didn't want [the display unit] because it wasn't a good fit for our semiconductor business."

As part of its portfolio adjustments, Philips Semiconductors is exiting several commodity segments, including standalone scalers and imaging modules.

The reorganization was announced on May 1, and the new groups will be fully functional as of July 1, according to van Houten.

- Junko Yoshida

EE Times

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