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Old 04-09-2008   #1
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Default Philips to Stop Manufacturing TVs for the U.S. Market

From The New York Times:

April 9, 2008
Philips to Stop Manufacturing TVs for the U.S. Market
LOS ANGELES — In another sign of a shake-out in the competitive flat-panel television market, Royal Philips Electronics, the Dutch consumer electronics giant, said it would no longer manufacture televisions for sale in the United States or Canada.

Philips-branded TVs will still be sold, but the sets will now be made under license by Funai Electric for at least five years. While not a well-known consumer brand in the United States, Funai, based in Tokyo, already sells Emerson, Sylvania, Symphonic and other lower-priced brands in the North American market.

As prices for flat-panel liquid-crystal-display TVs continue to fall, Philips has been in an unenviable position: while a well-known name, its televisions have not occupied the premium brand position of Sony and Samsung and the company could not compete on the low end with commodity brands like Vizio and Westinghouse.

The decision to simply license the brand and collect royalties “allows the Philips brand to be very evident in the North American market and de-risks the profit potential,” said Paul J. Zeven, the North American chief executive of Philips. “Margins here are razor-thin; this is a win-win situation.

In the United States, the company will focus on health care devices, lighting and other electronic products, Mr. Zeven said. The company said it was taking a charge of up to 125 million euros ($196.3 million) for the Funai transition.

Funai will be responsible for sourcing, distribution, marketing, sales and customer service for the Philips and Magnavox brands, beginning Sept. 1. Philips will continue to design, manufacture and market televisions in the rest of the world and also oversee Funai’s United States marketing.

The Philips share of the L.C.D. business in the United States has been steadily declining. While the company was the top-selling brand in the fourth quarter of 2006, with 17 percent market share, according to the research firm iSuppli, Philips dropped to sixth place one year later, with just a 6.6 percent share. In 2007, Philips sold $1.7 billion in televisions in North America, Mr. Zeven said.

“This is probably a good move for Philips,” said Riddhi Patel, an analyst with iSuppli. “They’re getting out of a business where margins are really getting squeezed.”

According to iSuppli, the average selling price for a 42-inch L.C.D. television has fallen 26 percent, to $1,544 from $2,082 a year ago. Depending on the manufacturer, the profit margin for that size set is 9 percent to 16 percent.

“Philips has a great top-tier brand in Europe, but it has been difficult for them to realize that premium positioning in the U.S.,” said Ross Rubin, director of industry analysis for the market research firm NPD Group.

The company joins other competitors that have reduced their presence in the United States. In 2003, Thomson, the French company, sold its RCA television brand to TCL of China. Last month, Pioneer announced that it would no longer produce its own plasma panels, buying them from others instead.

Globally, Philips has pulled back from consumer electronics manufacturing. Most recently, the company has significantly reduced its position in LG.Philips L.C.D., a display panel manufacturer. Originally a joint venture with LG Electronics of South Korea, Philips has now cut its stake to 13.2 percent and the company’s name has been changed to LG Display.
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