September 1, 2006 – The former semiconductor unit of Royal Philips Electronics, recently sold to a group of equity firms for 8.3 billion euros (about US $10.6 billion), has been relaunched as a new company, NXP (“Next Experience”). The firm will remain headquartered in Eindhoven, the Netherlands.
The new unit, which claims to be Europe’s second-largest semiconductor company with 37,000 workers worldwide, will target five markets: automotive, identification, home, mobile and personal, and multimarket semiconductors. A consortium of firms, including Kohlberg Kravis Roberts & Co., Bain Capital, Silver Lake Partners, Apax, and AlpInvest Partners NV, will maintain an 80.1% ownership stake, with the remaining 19.9% held by Philips.
“Today we take control of our own destiny and start to shape the future of the semiconductor industry,” stated CEO Frans van Houten. “Put simply, we’re enabling the next generation of consumer entertainment products.” NXP expects to invest about one billion euros ($1.28 billion) in R&D, and will have over 1.2 billion euros ($1.54 billion) in cash and credit reserves, he noted — hinting that the company might use the war chest to explore options for acquisitions.
To keep its association with its former parent company, NXP will retain the tagline “founded by Philips,” van Houten added. A center dedicated to emerging technologies has been established within NXP, housing nearly 600 scientists from Philips Research and Applied Technologies.
Formerly known as Philips Semiconductors, the business posted a profit of about $389 million in 2005 on sales of 4.6 billion euros ($5.89 billion). The unit’s 1H06 sales of about $2.99 billion put it a virtual tie with Freescale for the No. 10 spot in worldwide semiconductor sales, according to recent rankings from IC Insights Inc. The analyst firm projects that Philips will take over the 10th spot by year’s end, with stronger growth in 3Q and 4Q.
In June, Philips indicated it would either sell the division or spin it off by year’s end with an IPO, to enable the business to grow to bigger scale in order to better compete, according to a report in The Wall Street Journal. Initial reports indicated the company originally tried to sell the unit outright, but apparently found no takers, or at least not at an agreed-upon price — analysts had estimated that the unit would be worth about 5-6 billion euros ($7.6 billion).