Dutch electronics giant Philips said this morning that it will stop making mobile phones independently, cutting more than 1,000 jobs and linking hands instead with a Chinese company.
Much of the business of manufacturing and of research and development for mobile telephones would be transferred into a venture with China Electronics Corporation, Philips said in a statement.
'Philips will cease to be an independent manufacturer of mobile handsets,' said the company, which is struggling under a global downturn in the information technology market.
Philips, which has suffered plunging profits, followed in the footsteps of Swedish telecoms giant Ericsson in abandoning attempts to make mobile telephones independently. Ericsson is joining forces with Sony. Motorola in Ireland also outsourced its manufacturing operations to Celistica.
Philips employs 600 people in Ireland in sales and marketing, software design and accounting services. A spokesman for the company told OnBusiness that the latest job cuts announced would have no impact on the its Irish operations.
Philips said it would bring part of its research and development and part of its manufacturing activities into the partnership with China Electronics Corporation. The Dutch group already makes mobile telephones in a joint venture in Shenzhen, China, in which CEC holds a minority stake through its subsidiary SED.
Under the restructure, the Chinese partner would take a controlling stake in the joint venture and acquire some additional manufacturing equipment from Philips. Sales and marketing would remain under the Philips brand and the Dutch group said it would be able to sell mobile phones from the Chinese joint venture under its own name.
The deal was subject to regulatory approvals.
In France, Philips management was meeting during the day with the central works council for the country and with the works councils of each of its sites to inform them about the decision.
A delegate for the union Confederation Francaise Democratique du Travail said the management had said 1,235 jobs would be cut, but without outright sackings.
In April, Philips had already announced it would axe 6,000 to 7,000 jobs as net profits plunged 90.7% in the first three months of 2001 because of the global slump in information technology markets.
Philips president and chief executive Gerard Kleisterlee said the company was now focussing on its role as a provider of technology such as semiconductors and components to mobile telephone manufacturers.
'While focusing on our role as a technology provider we will continue to pursue the opportunity to sell Philips branded handsets through our sales and distribution channels where this has added value,' he said.
'We are confident that the arrangement with CEC will allow us to do so and will give our customers a renewed trust in the continuity of our business,' Kleisterlee added. 'By reducing the cost base drastically we will be able to realise market presence with greatly reduced exposure.'
Philips said it would take a one-time pre-tax charge of approximately 300 million euros for the restructuring, to be put on the books for the second or third quarter of the current fiscal year.
This charge will come in addition to charges previously announced to address its underperforming activities, including a charge of 350 million euros in components and consumer electronics and 90 million euros in semiconductors.
