The company revealed last December it would legally separate the division, and in an interview with EE Times in January, Frans van Houten, chief executive officer of Philips Semiconductors confirmed plans to pursue a merger but remained quiet about potential partners it may be pursuing.

In December 2005, it talked of spinning off its semiconductor business by mid-2006

A Philips spokesman told EE Times the company has now narrowed down the options to a partnership or merger with another semiconductor company, an IPO or a sale of shares to financial institutions.

We still do not know which the preferred option is. We have been discussing potential strategic partnerships over the past few months, and if the correct opportunity for this emerged, we would certainly not rule it out, said the spokesman.

In a letter e-mailed to employees Wednesday (June 21) Philips' President and CEO 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."

Kleisterlee added the disposal is part of group strategy to move from a focus on high volume electronics and implementing a strategy to build a Healthcare, Lifestyle and Technology company with a strong market focus.

Philips said it would start consultations 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.