Royal Philips Electronics NV has announced plans to trim E250m ($305.4m) off its semiconductor cost base in a sweeping reorganization that will see it increase outsourcing of production to from 20% to more than 30% of its output, and ultimately to 50%.
At a presentation to analysts in Amsterdam, the Netherlands, Philips was sketchy on details, particularly on any news about how many fabs would close and jobs would be lost.
With sales of E4.7bn in 2004, Philips is one of the world’s top 10 chip suppliers, and has been profitable for the past seven quarters. However, Philips wants to avoid vulnerability to the swings in demand for semiconductors that led even a company as big as Siemens AG to spin out its chip operation.
Philips aims to save E50m ($61m) by improving R&D effectiveness, trim E75m ($91.5m) from the sales, general and administration cost of doing business and E125m ($152.7m) from manufacturing costs. The aim is to lower the breakeven point and make the company less vulnerable to cycles.