The Joint Venture with TSMC in Singapore, SSMC is to be part of the acquired company I can confirm, after speaking with Philips, though this was not made clear in the Philips press release highlighting the sell-off or in the other press release notifying us of the new owners of the semiconductor division! Interestingly this was not covered by financial analyst questions over the sell-off in the subsequent conference call or covered by the many press reports of the news that followed!

Philips, naturally will retain its stake in TSMC and continues to make profits from every tranche of stock it sells as part of the long-term plan to get out of all holdings. Though, I do think this would have been a great give-away present to the new company and a way for them to secure TSMC production slots over the next few years. That said the TSMC stake is worth far too much to Philips and is money in the bank type investment, even though it's a semiconductor stock company!

Philips is retaining a 19.9 percent stake in the new company so that the semiconductor division will not appear on Royal Philips books anymore (20 percent threshold). The fact there is no tie-up clause, meaning Philips has to keep this level of investment for X number of years is contradictory to comments made in Philips press release. In that and in the conference call Philips stated that its 19.9 percent stake was requested by the new owners as well as Philips wanting to send a message to ex-employees that it was still interested in them and the future success of the company. That said a 3 year period or more of real commitment would have back up the words!

Of course the other reason for the stake is that it needs a good portion of the chips for its products so it really wants some arm bending power over the new owners, especially in product areas that others would perhaps not want to manufacturer, because the margins or units or both are low, for example. The unbundling I doubt got very far as part of the spin-off plans last year as this is the hardest part to pull-off. So its more a case of both sides needing each other, but both will be trying to disengage further, I just doubt Royal Philips wants to disengage as fast as KKR the majority new owner!

I also found it interesting that the semiconductor division noted its freedom would mean it could potentially sell more chips to previous rivals of Royal Philips now they had parted direct company. Yet a 19.9 percent stake would still gnaw on rivals I am sure! That said Royal Philips didn't highlight that it was now in a position to purchase semiconductors from past competitors, should the product be cheaper, better or both!

As with Qimonda, the new ex-Philips chip division has a significant revenue stream from Asia, which is expected to continue to grow. Both are forced to grow the companies in the coming years so there are few real options for them. This puts more and more pressure on companies to locate manufacturing and other support operations close to where the demand is. I see little yet to indicate that either company will be concentrating efforts in Europe for these growth markets, concluding over time that these two current European HQ based fledglings could and probably should fly away and build new nests in Asia. Remember that mother has tossed them out of the nest now and are basically on their own!

Something that is sure to happen over the next twenty years is the continued major exodus of both manufacturing and HQ's from Europe, so will the last European semiconductor manufacturer please turn off the lights when it decides to leave! I hope to have retired by then and I am not sure I will be around to do that job for them.