Philips Outsources Flat-Screen Production; Implements Funai Deal

By TWICE Staff -- TWICE, 9/4/2008

Amsterdam, The Netherlands — Royal Philips Electronics has agreed to transfer its TV assembly facility located in Juarez, Mexico, to Elcoteq, an electronics manufacturing services company based in Luxembourg. The company also announced that it successfully implemented its previously announced brand-licensing agreement with Funai.

Philips said the transfer of its TV assembly facility to Elcoteq represents a step to improve the financial performance of its TV business through the optimization of its global supply base.

Under the terms of the agreement, approximately 740 employees working for the assembly facility, which makes flats-screen TVs for the North and Central American markets, will transfer to Elcoteq. Philips did not disclose any further financial details of this agreement because it said the financial results related to the transaction are not material to the company.

In other news, Philips also reported that as of Aug. 15, it successfully implemented its previously announced brand-licensing agreement under which sourcing, distribution, marketing and sales of all Philips’ consumer TV activities in the United States and Canada are being outsourced to Funai Electric. Philips said it has commenced deconsolidating the involved business as per the same date.

The agreement stipulates that Philips receives royalty payments in exchange for Funai’s right to exclusively use the Philips and Magnavox brand names for its consumer TV offerings in North America for a minimum five-year period with options for further extension.

Philips said the agreement secured the continued presence of Philips- and Magnavox-branded TVs in North America in a business model that safeguards its profitability in that market. The deal does not affect any other Philips consumer category in North America nor its TV business in the rest of the world.

Finally, Philips also said it “will continue to further improve the financial performance of its former consumer electronics businesses through ongoing optimization of the portfolio and its global supply base, as well as by focusing its marketing and sales efforts on the strongest markets.”