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The Amsterdam-based company announced that it is to form a partnership with China Electronics Corporation (CEC), under which it will conduct its research and development as well as handset manufacturing activities.
However the company says it will continue to market under the Philips brand. It also announced that it would concentrate more on the semiconductors and components industry.
Philips currently manufactures mobile handsets in a joint venture in Shenzen, China, in which CEC holds a minority stake through its subsidiary SED. Both companies have agreed that CEC and SED will increase their share in this joint venture to a controlling stake and will acquire some additional manufacturing equipment from Philips.
The company said that this move will involve a "major restructuring of Philips' mobile handset business." Philips management is currently meeting in France to inform the Central Works Council of the situation.
For the re-structuring, Philips is to take a one-time pre-tax charge of approximately EUR300 million, to be taken in the second or third quarter of the current fiscal year. This charge will come in addition to other charges, which Philips previously announced to address structurally under-performing activities.
The turmoil in the mobile phone industry has seen handset makers struggle as they look for ways to move themselves back into profitability.
In April, Ericsson reported dramatically lower results, with an 89 percent drop in earnings per share. The losses were attributed mainly to a weakening of the mobile phone market. In the same month, Ericsson and Sony announced that they were to merge their mobile businesses.
Although Nokia has continued to maintain a steady position in the market, with sales growing by 22 percent in the first quarter of 2001 the company issued a profit warning earlier this month. In the warning the company said it expected "the global mobile phone market to show only very modest growth this year compared to 2000."
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