Such separations are often done as preparation for a spin-off by way of a sale to another company, or a merger, or a sale in the form of a public offering of shares

Philips introduced a business renewal program early in 2005 intended to improve the competitiveness of the semiconductor division and increase profitability to between 5 percent and 15 percent. It was also intended to increase Philips market share four core businesses: mobile and personal; home; automotive and identification; and multimarket semiconductor chips.

“While we are pleased with the progress of the business renewal program, we see opportunities to further strengthen the activities and maximize shareholder value, with the step we announced today, in an industry where scale matters,” said Gerard Kleisterlee, the president and chief executive officer of Philips Electronics, in a statement.

“This move will lead to increased flexibility for our semiconductor business to invest, grow and build scale in the competitive semiconductor market, while continuing to leverage the strengths of Philips overall. This is good news for our customers and employees,” said Frans van Houten, chief executive officer of Philips Semiconductors.