PHILLIPS_162.JPGYou
didn't know that Philips, the Dutch electronics giant, made mobile
phones? Well, it doesn't, at least not any more. The company has sold its mobile phone JV to China Electronics Corporation for a reported €400m, thus becoming the latest western manufacturer to pull the cord on its troubled phone business.

Of
course, for Nokia and Motorola this business is still booming, thanks
in no small part to their early recognition of the critical importance
of China, both as a manufacturing base and as a huge potential market.

But
one by one, Europe's big electronics manufacturers — Alcatel, Siemens
and now Philips — have struggled to remain afloat in the choppy waters
of the mobile phone industry.

Philips signalled its intention to
pull out of mobile phone business in 2001 when CEC, originally its
contract manufacturer, took control of their existing JV.

Since
then, Philips has produced some interesting phones but it has struggled
to get taken seriously and its market share has remained a dismal 3%.

It
has long been apparent that the business was no longer getting the
attention it deserved within the Royal Philips Electronics group, which
has had other distractions.

The Dutch electronics giant is
coming to the end of a painful restructuring which has seen it divest
traditional but problematic businesses such as components and
semiconductors, in a bid to become a more focussed “healthcare and
lifestyle company”, which basically means medical equipment, lighting
and consumer electronics.

Alcatel adopted a similar staged
withdrawal from the phone business. It created a mobile phone JV with
TCL Communications of China in 2005 but no-one was under any illusion
that it remained committed to the business. A year later, it sold out
to its Chinese partner.

Siemens sold 90% of its loss-making
handsets business to BenQ last year and the Taiwanese company has now
decided its not worth trying to save. Last month, BenQ Mobile was
placed into insolvency.

A decade ago, the booming mobile phone
industry seemed open to all comers. But today it is consolidating fast
and the top five manufacturers — Nokia, Motorola, Samsung, Sony
Ericsson and LG Electronics — now have around 80% of the market.

CEC
will take over the responsibility for Philips' mobile phones business,
which currently has a turnover of around €400m and approximately 240
employees, mainly in Asia Pacific and eastern Europe.

Beijing-based
CEC is even more of a sprawling group than Philips with activities that
include semiconductors, computers, software, mobile phones, equipment
imports and even exhibitions. Sangfei, a Shenzhen-based subsidiary, has
traditionally made the Philips-branded phones as well as phones bearing
its own SED brand.

CEC also owns Amoi Electronics, which makes
mobile phones at a factory in Xiamen, Fujian province, and according to
the China Daily, Amoi is the stronger of CEC's phone brands

CEC
will have the right to use the Philips brand worldwide over the next
five years, but it hardly enjoys the same brand recognition of Motorola
and Nokia, least of all in China.

Nevertheless, adopting a
“prestigious” western brand like Philips could give some coherence to
CEC's confused branding strategy and help it stand out in China's
crowded mobile phone market

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