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Philips To Outsource Mainstream CE Products

Saddled by what it calls activities that offer low growth and low returns in its commodity consumer electronics business, Philips said its Consumer Electronics Mainstream division would sell a number of CE factories that produce mature products, such as standard TV sets.

To this end, Philips said it was already holding discussions with potential partners, which might take over these manufacturing sites.

Philips, which would not say where the on-the-block factories were located, said the shift of manufacturing to third parties would not result in massive job losses. It said existing plants would in many cases simply gain new owners.

Europe’s largest consumer electronics maker, based here, said parts of its CE Mainstream division, mainly TVs and VCRs, can expect to see growth of only about 4 percent. The division accounts for about 25 percent of total company sales.

The announcement concerning this aspect of how Philips plans to reduce overall costs comes at the same time the company said production of VCRs for the European market will be outsourced to Japanese VCR-maker Funai Electric Co. Funai is Philips’ licensee for the North American market.

Philips, which said it would scale down its own developmental activities in the video tape-recorder business, said it is looking to become more of a technology supplier for newer products as well as a marketing organization.

The company said the decision to partner with Funai in VCRs was prompted by the maturing of the business, which is consolidating and centering in Asia. Philips said it now will concentrate on newer product growth possibilities, such as those in flat-screen TVs, digital video and DVD technology.

Changes in Philips’ CE division follow earlier announcements about restructuring made by Gerard Kleisterlee, the new parent-company chairman, who took over last May.

Kleisterlee has said products would remain under Philips’ manufacturing wing only if these offered the prospect of market leadership or could have their performance improved.

In July, Philips reported an overall 18 percent drop in second-quarter dollar sales for its CE products, with sales growth in North America dipping 5 percent.

Sales of mainstream CE products, overall, were 10 percent lower in the second quarter than the year-ago three months, the company said.