Koninklijke Philips Electronics sells chips unit for $10.6 billion
Koninklijke Philips Electronics agreed to sell an 80.1 percent stake in its chip division to a group including Kohlberg Kravis Roberts & Co. (KKR), Silver Lake Partners and AlpInvest Partners, it said in a statement Thursday. The European electronics giant will keep a 19.9-percent share of the business. This is a huge deal that will change the market in more ways than one can fathom.
Philips cited a desire to shift away from cyclical businesses as one reason for the sale, a reason noted by a number of companies that have exited the DRAM (dynamic RAM) sector in recent years, including Infineon. The chip industry tends to run in a boom and bust pattern. Chip sales heat up at different times of the year, then slow down at others, causing financial results to leap and fall. The industry also has a two to three-year cycle in which shortages cause chip prices to spike, followed by companies rushing to invest in new factories that eventually flood the market again and send prices down. The company also expects its semiconductor division to have a better chance to expand sales as a stand-alone unit. As part of Philips, it’s hard for the chip division to sell products to rivals of Philips’ other business units.
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