Philips to Stop Manufacturing TVs for US Market
Royal Philips Electronics, apparently sick of the hyper-competitive nature of TV sales which results in ultra-low profit margins, will no longer manufacture televisions for sale in the United States or Canada as of September 1, 2008 (current inventories notwithstanding). TVs will still be sold under the "Philips" brand, but for at least the next 5 years they will be made under license by Funai Electric. Funai is a Tokyo-based company that already sells Emerson, Sylvania, Symphonic and other lower-priced brands in the North American market.
This tells us that the quality of Philips is likely to head due South in the next half-decade unless Funai does a better job at competing at the lower-end market (think Vizio and Westinghouse) than other brands it puts forth. Since their deal is essentially one that merely licenses the Philips brand name, this is unlikely. While Philips thinks this is a good plan to cut costs and save on the thin margin-issue it has been plagued with, it's just as likely that the Philips name will permanently be relegated to the likes of GE, Emerson and Polaroid in the CE market. Their Magnavox division has already suffered a similar fate in terms of its reputation for average or even sub-par quality AV products.
The big question everyone is asking is "Why?" According to iSuppli, Philips was a top-selling brand in the fourth quarter of 2006, capturing 17 percent of the market share. One year later Philips dropped to sixth place at just 6.6 percent. Last year, Philips sold "just" $1.7 billion in televisions in North America - a meager slice of the entire CE pie in that category.
The changeover to the Funai licensing deal will cost the company around $196.3 million. Funai will then be in charge of manufacturing, distribution, marketing, sales and customer service for both the Philips and Magnavox brands. Philips will continue to design, manufacture and market televisions in the rest of the world and will also be able to oversee Funai’s US marketing (since they still control the name and Philips brand license).
Philips has also done some pulling back from consumer electronics manufacturing in the worldwide markets. Recently, the company has significantly reduced its position to just 13.2 percent in LG Philips LCD, a display panel manufacturer, prompting the company’s name has change to LG Display.
You guys are acting like Philips has made quality electronics for the last 5 years. Their stuff has been barely above Magnavox and RCA in terms of quality. (Their optical players and recorders are just above junk. I have two. I know.) They're not even in the same league as JVC, Toshiba and Mitsubishi much less Sony, Pioneer, etc. Them outsourcing to Funai won't make their displays any worse. BTW, Funai manufactures a stuff for Denon as well.
That is sad to hear. My only acquaintance with Philips has been TVs over the years. We had a number of them that worked with no problems for many years in our Grand Forks Home. I just gave the last two away on Craig's list when we moved into our town home in Eagan, to a guy who wanted them for a security system. They were working fine.
It still does not sound good. There are a number of articles on this. This [displaydaily.com] seems to be the best.
In essence Funai have the right to the Philips Magnavox name brands in the US and Canada. They have access to Philips R &D and technology. They source the parts, and will build them at the JVC factory in Mexico.
Unfortunately investment bankers don't understand electronics. As a matter of fact they have proved they can't smell rotten apples when they are buried in them!
What an investment banker type would not understand, is that sourcing the parts is a big part of the production. In fact Peter Walker told me years ago this was the toughest and most difficult part of electronic manufacture. Assesing the quality and long term reliability of components is very hard.
I have often thought there should be a constitutional amendment to the effect that only qualified individuals who have intimate technical knowledge of what is being produced can be part of management, or be on the board.
This is all part of not looking at the long term picture, just band aids for fast profits. Bad judgments by the banking investment community are responsible for this financial mess, as they know next to nothing about anything, especially what generates real wealth.
We are now running dry on oil. Oil was low hanging fruit. Coming up with viable long term strategies, and providing financing for the long view, not short, is necessary for the survival of our culture as we know it. We need to look at how they did it all between about 1830 and 1910. Lessons need to be relearned, and soon, especially by our new investment analyst and colleagues.
Disclaimer: there should be no offence taken because of the subjective hurmor, without lab measurments +/-3dbs