Philips Semiconductors
Philips Semiconductors …
A Cornerstone for Growth
of the Philips Group
Arthur van der Poel
Member, Board of Management
Royal Philips Electronics
Philips Semiconductors
Topics Today
1 Group perspective on Philips Semiconductors
2 Investments for Growth
3 Semiconductor markets today
Philips Semiconductors
Topics Today
1 Group perspective on Philips Semiconductors
2 Investments for Growth
3 Semiconductor markets today
Philips Semiconductors
Philips a Technology Company
• Research, Semiconductors, Components, and parts
of Consumer Electronics are at the heart of the High
Growth Technology Company
• Lighting is a world leader and growth will come from
better performance and technology driven innovation
• Medical Systems is a technology driven business with
growth opportunities from our recent investments
• DAP is a mix of brand businesses with some important
technology components (e.g., Shavers and Dental Care)
… with a strong Brand and Cash Flow
Philips Semiconductors
Semiconductors has shown
Solid Financial Performance
Million Euro
1996 1997 1998 1999 2000
Sales 3,064 3,793 3,963 4,557 6,812
Growth 9% 24% 4% 15% 49%
IFO 369 773 765 620 1,346
% of sales 12% 20% 19% 14% 20%
Philips Semiconductors
5 years of Strong Business Achievements
We focused
our business and developed
successful strategies in
wireless, display drivers,
identification and networking
Philips Semiconductors
5 years of Strong Business Achievements
Consolidated top position
in conventional markets
Recognized leadership in
RF and Video Processing
Philips Semiconductors
5 years of Strong Business Achievements
Reinforced manufacturing
leadership
Joined premier league in CMOS
Technology
Developed creative R&D &
manufacturing solutions
(SSMC, IMEC, Crolles2)
Philips Semiconductors
5 years of Strong Business Achievements
Recognized leadership
in platform architecture
Philips Semiconductors
5 years of Strong Business Achievements
Successful
integration
of VLSI
acquisition
Philips Semiconductors
VLSI Acquisition Major Success
An excellent example of the success in growing our
business. We set out three objectives for the acquisition:
• Grow market share in the communications market
• Improve our capabilities in ASICs and the development
platforms
• Introduce more ‘Silicon Valley’ entrepreneurism into the
culture
Philips Semiconductors
Opportunities for Improvement
• Increase top-line growth
• Build greater customer intimacy with industry leaders
• Improve position in Digital CE
Philips Semiconductors
Topics Today
1 Group perspective on Philips Semiconductors
2 Investments for Growth
3 Semiconductor markets today
Philips Will Continue to Invest Philips Semiconductors
for Future Revenues
2001
Euro billion
2
R&D
1.5 Capex
Original 2001 plan
1
0.5
0 1998 1999 2000
1997
Philips Semiconductors
Topics Today
1 Group perspective on Philips Semiconductors
2 Investments for Growth
3 Semiconductor markets today
Philips Semiconductors
Semiconductors Market
Growth Forecasts
Expected percentage growth from 2000 to 2001
WSTS Dataquest
December 2000 20 25
May2001 -14 -17
-26
August 2001 -251)
1) May forecast updated for Q2 actuals
Philips Semiconductors
A snapshot of today’s situation
• Q3 sales expected 17-18% sequential decline
• Order intake in some areas improving but with short
delivery times
• Corrective actions are taking effect
– Capex
– Cost & headcount
– Inventories
• Utilization rates expected to improve in Q4
• Further capacity rationalization and cost base reduction
Philips took quick action to adapt Philips Semiconductors
to the changing market
Q4 est.
CAPEX (M€) Q1 Q2 Q3 est. 50
420 350 130
Restructuring/ 0 90 20 90
Headcount
reduction (M€)
Inventories 100 95 83 79
(index 100 in Q1)
Headcount 37,160 36,400 34,000 33,000
(people)
Philips Semiconductors
Summary
• Our Philips Semiconductors division has shown
strong financial performance, which has created
a solid foundation for the future
• The Philips group strongly supports the Semiconductor
division in its focus on growth
• Despite today’s difficult market environment, Philips
continues to see Semiconductors as an attractive
growth market
Philips Semiconductors
Philips Semiconductors …
A Cornerstone for Growth
of the Philips Group
Arthur van der Poel
Member Board of Management
Royal Philips Electronics