News

With worldwide demand for semiconductors lower than it has been in many years, Philips Electronics NV has announced an organizational streamlining that may cost 4000 workers their jobs.

The announcement was made Friday, November 23, by chief executive Gerard Kleisterlee. In a letter to company executives, Kleisterlee indicated that cuts would be made in Philips' finance, human resources, and information technology departments, in the hope of saving as much as 300 million euros (US$263.8 million) over an unspecified period of time. Philips has already cut approximately 6000 jobs this year. Further cutbacks would result in a total downsizing of as many as 10,000 workers this year—a 5% reduction overall.

The Dutch electronics giant makes semiconductor devices—transistors, rectifiers, and analog and digital ICs—in addition to engaging in primary research and building finished products for industrial, scientific, and consumer applications, making it one of only a few companies (Hitachi is another) with interests that span several markets. Philips has been affected by a general decrease in demand for consumer electronics as well as by a steep decline in the demand for semiconductors. Philips' semiconductor sales dropped 45% in the month of October alone; company executives are predicting that results for its semiconductor division will be off by about 40% for the fourth quarter.

Figures from the Semiconductor Industry Association indicate that this year, sales of such products have dropped 42% from last year's level of $18 billion (20.51 billion euros). No rebound in the semiconductor market is expected anytime in the near future.

Some outside analysts have suggested that Philips should merge its semiconductor operation with that of another company, such as French chip maker ST Microelectronics NV, which owns a bigger share of the market for digital and audio devices, according to Dan Bilefsky of the Wall Street Journal. Philips has no immediate plans to do so, although executives of the two companies have had amicable meetings, including some in which they have discussed joint research and development projects. The two are also sharing the costs of developing and running a new chip-making facility.