Philips talks about struggling semiconductor business

The competitive semiconductor industry has prompted Royal Philips Electronics to spin off its semiconductor business this year, and the company has confirmed it wishes to pursue a merger. Analysts believe STMicroelectronics is the likeliest merger partner. CEO Frans Van Houten said consolidation in the semiconductor industry is unavoidable and scale is critical. Philips may already be unable to afford substantial R&D investment in products that range from automotive and consumer electronics to mobile, telecommunications and standard products.

"The diversity of solutions required for applications in each product line is not getting smaller," acknowledged van Houten. "Scale matters." And spinning off from larger companies and doing an IPO like Freescale and Infineon won't give Philips the scale it needs.

For more on Philips' merger plans:
- check out this article from the EE Times