Philips aims for minority position in Semiconductors in 2006

Preparations for a separate stock exchange listing have started

Wednesday, June 21, 2006, Amsterdam, the Netherlands – Royal Philips Electronics (NYSE:PHG, AEX: PHI) today announced the intention of the company to reduce its ownership share in its Semiconductors division in the course of the second half of 2006 to a minority stake through an IPO of the company and/or sale of shares to financial investors, while continuing to evaluate industry consolidation opportunities.

In December 2005 Philips announced that its Semiconductors division would be legally separated in order to generate value to Philips’ shareholders and to provide better ability to the division to achieve its business renewal objectives and become a stronger company.



In a letter e-mailed to employees today Philips’ President and CEO Mr. Gerard Kleisterlee, wrote: “In the course of these last few months hundreds of Philips people have been working long hours on issues relating to the disentanglement of Semiconductors, while a small top team has worked on the pursuit of the different strategic alternatives. Both projects are well on track and in the process we have been able to define more clearly the next steps we will make and the outcome that will result in, both for Philips as well as Semiconductors. This has led us to the decision to speed up the transformation of our Semiconductors division into a standalone company that is separate from Philips and will have a majority third parties ownership.”



Mr. Kleisterlee further added: “The future deconsolidation of Semiconductors is a further step for Philips in moving away from a focus on high volume electronics and implementing a strategy to build a Healthcare, Lifestyle and Technology company with a strong market focus around the brand promise of Sense and Simplicity.”



The new semiconductors company will strongly continue its business renewal strategy as well as consider additional measures to strengthen its portfolio in Mobile & Personal, Home, Automotive & Identification and Multi Market Semiconductors. Naming for the company will be announced in due course and preparations for a separate stock exchange listing have started.



Philips will engage in consultation with workers councils about the steps that need to be set in order to complete the disentanglement by the end of the third quarter and create an independent semiconductor company with majority third party shareholding before the end of the year 2006.

This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities.

About Royal Philips Electronics

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is one of the world’s biggest electronics companies and Europe’s largest, with sales of EUR 30.4 billion in 2005. With activities in the three interlocking domains of healthcare, lifestyle and technology and 161,500 employees in more than 60 countries, it has market leadership positions in medical diagnostic imaging and patient monitoring, color television sets, electric shavers, lighting and silicon system solutions. News from Philips is located at www.philips.com/newscenter

Forward-looking statements

This release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

Contact Information

Jayson Otke

Philips Corporate Communications

Royal Philips Electronics

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