Philips chips lose their lustre

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Philips chips lose their lustre

Two days after announcing that the head of its semiconductor business will leave the company, Philips has lowered its forecast for the division's third-quarter sales.

The Dutch company now expects semiconductor sales to remain flat after previously forecasting an increase of between 3%-4%, although that will still be 27% higher than in the same quarter last year.

Semiconductors are a profitable part of Philips' business. In the second quarter, chips contributed around one-fifth of Philips' revenue but two-fifths of its operating income.

Much of that revenue comes from "connected consumer" applications such as chips for home entertainment products, mobile phones and computer peripherals. The division also makes general-purpose semiconductors and logic devices for the electronics industry.

To drive future profit growth, the company will focus on developing its Nexperia programmable system-on-chip range for multimedia appliances, and on emerging technologies such as near-field communication, used in products such as contactless smartcards.

Last week Philips announced that Scott McGregor, head of the semiconductor division, would leave the company at the end of this year. McGregor has headed the division since September 2001, leading it through one of the most difficult periods in its history and turning it into a leaner, more innovative business.

McGregor will be replaced by Frans van Houten, currently head of Philips' consumer electronics businesses. Rudy Provoost, head of global sales and services at the consumer electronics division, will become its CEO.

Peter Sayer writes for IDG News Service

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