AMSTERDAM, 16/12/05 - Philips wants to be less dependent on the sharply fluctuating results of its chips division. The electronics group therefore plans to spin off the unit to operate independently.

CEO Kleisterlee said the chips division would be legally separated from Philips in the second half of next year. Meanwhile, the company is looking at "a series of options" to strengthen the unit. A merger with another chips-maker is among the possibilities, as is a bourse flotation, he announced yesterday.

Philips has not been put under pressure by shareholders, Kleisterlee stressed in a commentary. Last year, the chips division generated sales of 4.2 billion euros, or nearly 14 percent of group sales. But the unit is too small to be among the global leaders.

Research bureau Gartner reported last week that Philips has dropped out of the global Top 10 in the production of chips. In Europe, Philips is number three, after Franco-Italian STMicroelectronics and Infineon of Germany. The company is strongest in chips for mobile phones, auto electronics and home electronics.

According to chips division director Frans van Houten, a merger wave will hit the chips industry in the coming years. "We want to be one of the first companies to move in this." The spinoff of the chips division will make Philips more predictable in terms of profitability, Kleisterlee promised.

Philips also announced yesterday the appointment of the heads of the present five divisions within the group to the management board. The board will consist of eight executives from 1 April, when Chief Technology Officer Ad Huijser is stepping down.