Tue, Feb 17, 2004 page10

• Philips predicts robust growth this year

  CHIP OFF THE OLD BLOCK The chipmaker forecasts as much as 20 percent growth for this year, and plans to continue its regional operations from its base in Taiwan

  • By Bill Heaney / STAFF REPORTER
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  Philips Semiconductors yesterday joined chip industry researchers and chipmakers in forecasting a strong recovery in semiconductor sales this year.

  "Our feeling points to a more robust year," said Rob Fletcher, a vice president and general manager of Philips Semiconductors Asia. "We would say closer to 20 percent [growth] than 10 percent."

  Fletcher was echoing Morris Chang (張忠謀), chairman of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) -- the world's largest contract manufacturer of chips -- who predicted that his company would see growth of around 20 percent this year.

  In December, US-based International Data Corp (IDC) forecast a growth rate of 18 percent for the semiconductor industry this year based on stronger mobile phone and computer sales as people replace ageing devices.

  "IDC expects that unit shipments will grow in double digits this year and next year for both mobile phones and PCs, which will drive a healthy growth cycle for over half of the semiconductor industry," the report said.

  The semiconductor industry was worth US$160 billion last year, IDC reported, predicting that the industry would grow to US$282 billion by 2008.

  Another US-based researcher, In-Stat/MDR, was more upbeat about the prospects for growth in the chip industry this year, projecting growth of almost 26 percent.

  "In-Stat/MDR feels that, unlike past recoveries, which were driven by specific products, such as PCs or mobile phones, this recovery is more broadly based, making it slower, but less susceptible to changes in specific end product markets," a report published last quarter said.

  Philips Semiconductors, which finally made a profit last quarter after seeing only red ink since its formation in 2001, needs to attract more sales.

  "We have disappointed our shareholders and other parts of Royal Philips Electronics with our performance in the last three years," Fletcher said. "We have to stand on our own two feet in 2004."

  Last year, Philips Semiconductors made 5.2 billion euros (US$6.3 billion) in revenue, but reported a loss of 523 million euros in the first nine months, before seeing a modest 154 million euro profit in the last three months of the year.

  The return to profit was achieved by cost-cutting, Fletcher said, and the company plans to continue the policy this year.

  "Over the next five years, we plan to outsource up to 50 percent of our advanced processes," Fletcher said.

  As the costs of manufacturing chips increases to multi-billion dollar levels, companies are being forced to cooperate in joint ventures and partnerships to spread costs, Fletcher added.

  Philips' most recent joint ventures have been in Jilin, China, with Jilin Semiconductor Manufacturing Co, and in Crolles, France, with Motorola Inc, ST Microelectronics and TSMC. Philips invested US$430 million in the US$1.6 billion advanced chipmaking plant in Crolles.

  Philips Semiconductors bases its marketing and sales for the Asia-Pacific region out of Taipei, and has located its display solutions business unit and laboratory headquarters here. The company's global integrated circuit assembly and test center is located in Kaohsiung.

  "For us, we will continue to service the Asia-Pacific region from Taiwan," Fletcher said. "It's been good for us and it makes sense for us to stay here."

  Last year 54 percent of Philips Semiconductors sales went to customers in the Asia-Pacific region.
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