Philips lowers forecast for chip division

Philips lowers forecast for chip division

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

The Amsterdam company now expects sales at the semiconductor division to remain flat compared to the second quarter, where previously it had forecast an increase of 3-4 per cent. Compared to the year-earlier quarter, the company expects third-quarter semiconductor sales to rise by 27 per cent in US dollar terms, it said in a statement.

Semiconductors are a profitable part of Philips' business: in the second quarter, the division contributed around one-fifth of Philips' revenue, but two-fifths of its operating income. "Connected consumer" applications accounted for much of that revenue, the company said. These applications include chips for products such as home entertainment items, mobile phones and computer peripherals. The division also makes general-purpose semiconductors and logic devices used across 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 smart cards, the company said.

On Wednesday, Philips announced that semiconductor division chief executive officer (CEO), Scott McGregor, plans to leave the company on January 1, 2005. McGregor has headed the semiconductor division since September 2001, leading it through one of the most difficult periods in its history, the company said, and credited him with turning the division into a leaner, more innovative business.

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

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