Philips operations to stay in RP

By JENNEE GRACE U. RUBRICO, BusinessWorld Senior Reporter The Philippine semiconductor operations of Dutch company Royal Philips Electronics will keep all its 5,500 employees and its two manufacturing plants in the country following its transfer to a consortium that made a global acquisition of a majority stake in Philips’ semiconductors division. The move, however, will substantially reduce Philips’ revenues from the country, given that the semiconductor operations in Cabuyao and Calamba are the Philippine operations’ largest sales contributors. Philips Semiconductors Philippines, Inc., which produces chips that are exported to other countries for use in mobile phones, automobiles, and other applications, operates the Calamba and Cabuyao semiconductors plants in the country. The 25-year old unit occupies a total of 40 hectares of land in the Philippines for its plants. In 2005, the firm, considered the biggest sales contributor for Philips’ semiconductor business in Asia, breached the $1-billion mark for export sales, buoyed by strong demand for chips from the automotive, industrial, and telecommunications industries, Steven Brader, Philips Semiconductors general manager for the Cabuyao plant, said. The unit expects to grow its revenues by another 20% to 25% this year, officials added. "I do not think [there will be a relocation of the plants]. I do not see any implications of the merger [for the semiconductors division of Philips] on local operations. We are very competitive and we see a major commitment [to keep the Philippine operations]," Philips Electronic and Lighting, Inc. President Menardo G. Mateo said in a briefing on the company’s 50th anniversary celebration on Wednesday. He noted that the sale of the majority stake of the semiconductors unit was done "for scalability and growth." "It is to achieve growth and flexibility to the semiconductors business, so it’s going to be good," he said. On Aug. 3, Philips announced that it signed an agreement with a consortium composed of Kohlberg Kravis Roberts & Co. (KKR), Silver Lake Partners and Alpinvest Partners NV for the consortium’s acquisition of an 80.1% stake in Philips’ Semiconductors business for 6.4 billion euros. Philips will retain a 19.9% stake in this business. The local operations, however, will substantially reduce its revenue contribution to the Philips group of companies, since sources said that local sales are smaller than the export sales of the semiconductors business. The local sales cover sales of Philips products, which include medical equipment, lifestyle products like mobile phones, audio players, shavers, and television, and household products like coffee makers, toasters, and flat irons. "For last year, local sales was at $120 million," a source said. Mr. Mateo, however, said that the company does not need to offset the revenues it will lose following the transfer of the semiconductors division to the consortium, as the company will still own 20% of the money-making unit. He also said that the spin-off would allow Philips in the Philippines to concentrate on its local activities.