Philips to spin off microchip making by end of 2006

Philips Electronics is to get rid of most of its semiconductor division. The Netherlands’ company said sometime this year it will hold an initial public offering of shares or sell a majority stake in the unit.

The plan is to concentrate on areas that are not so volatile and less affected by economic swings including medical systems and appliances. Philips is Europe’s third-largest maker of microchips and tenth in the world. At 4.62 billion euros, the semiconductor unit accounted for 15% of Philips’ total sales last year.

Analysts’ estimates on the worth of the division vary, with the highest being between seven and nine billion euros. The problem for Philips is that the chip unit requires more investment than other parts of the business, but returns lower profit than areas such as appliances, lighting and medical systems. Industry experts say potential buyers include Europe’s two largest chipmakers – Franco-Italian STMicroelectronics and Germany’s Infineon Technologies.

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