Philips TVs: Chinese joint venture
TV division, a major cause of falling profits, is 'separated' – company keeps just 30% interest, focuses consumer division's attention on health and well-being products

Falling profits have forced Philips to move its television production into a joint venture with a Chinese company, called TP Vision.

Under the deal, the Dutch company will effectively give up control of TV manufacturing, having a stake in the new joint venture of just 30%.

TPV will control the operation and licence the Philips brand name to use on the TVs it manufactures.

The company's TV division has long been a problem: in common with other major consumer electronics companies, Philips has been struggling to make TVs make money, and resolving the situation was one of the priorities for its new President and CEO, Frans van Houten.

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The deal, with China-based TPV Technology (above), is seen by Philips as the solution to the problem, and follows the company's decision a couple of years back to licence its brand to Japanese company Funai, which now makes Philips TVs for the North American market.

It already has a similar deal with TPV for TVs desitined for the Chinese market, and a licencing arrangment with Videocom in India.

The deal now means Philips is completely out of the TV business, and its brand will only appear on TVs made by other companies.

The Philips statement says that 'we strongly believe that the intended 30% / 70% joint venture with TPV that was announced today will enable a return to profitability for the Television business, and an increased portfolio focus for Philips in health and well-being.

'Philips has been active in the TV industry for many decades and the long-term strategic partnership with TPV shows our commitment to the continuity of Philips televisions for our consumers and trade partners.

'The joint venture leverages the innovation and brand strength of Philips with the scale and manufacturing strength of TPV. Philips will receive a deferred purchase price and brand license income as part of the agreement.

'We expect certain costs in relation to the separation which will impact short-term earnings.'

TV market analysts DisplaySearch point out that, while Philips had over 10% of the European LCD TV market last year, in global terms it had a market share of just 3.8%.

Its 3.7% share of the 3D TV market was, however, enough to put it in fifth place worldwide in that market sector.

70% of the panels for Philips TVs came from LG Display, which which Philips used to have a joint venture in Korea (later bought out by LG). The remaining 30% were sourced from Sharp.

TPV was listed on the Hong Kong and Singapore stock exchanges in 1999, and the company acquired part of Philips' monitor and flatscreen TV business in 2005.

It's the world's leading manufacturer of OEM LCD TVs – ie those made to be bought by other companies and sold under their brandnames – and produces TVs for more than 25 brands worldwide.

The company expects to produce more than 18m LCD TVs this year, and has joint ventures with panel and TV manufacturers including LG Display and BenQ-owned AU Optronics.

It says 'we have emerged as the largest monitor maker in the world, and command a strong position in the People's Republic of China (PRC) market.'

Trading in TPV shares was suspended on the Hong Kong stock exchange ahead of the announcement.