Philips

• 1. Introduction

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  Philips is the Dutch company that makes MRI scanners, and it also makes the Sonicare toothbrush. Its catalogue today runs from CT and ultrasound machines to patient monitors, electric shavers and Avent baby products. Its official name, Koninklijke Philips N.V., means Royal Philips. The royal title came in 1998. The company also founded a multidisciplinary sports club in 1913, and that club became the football team PSV Eindhoven.

  For much of the twentieth century, Philips was among the largest electronics conglomerates anywhere. It made kitchen appliances, televisions, shavers and light bulbs. At one point it also held a commanding place in the entertainment industry. By the 2010s it had sold off or spun out most of that empire and become a healthcare business.

  How does a firm go from a single family workshop to that sprawling reach, and then shrink back on purpose? Why did one of its famous radio stations broadcast across the globe, while another of its engines never found a market? What happened when its name could not legally be printed on its own products in the United States? And what went wrong with the breathing machines that made headlines in 2021?

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• 2. Family Beginnings

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  Frederik Philips was a banker in the town of Zaltbommel, and in 1891 he joined his son Gerard in starting a business. Frederik paid for an empty factory building in Eindhoven. There, from 1892, the pair began turning out lamps with carbon filaments and a few other electrical goods. That first factory still stands, now converted into a museum.

  The early years were hard, and the firm came close to going bankrupt. In 1895 the Philipses brought in Anton, who was sixteen years younger than his brother Gerard. Anton held an engineering degree, yet he began as a sales representative. Soon he was supplying many of the commercial ideas that the firm needed.

  With Anton aboard, the business grew quickly. In 1908 it became Philips Metaalgloeilampfabriek N.V., the Philips Metal Filament Lamp Factory. In 1912 came a second company, Philips Gloeilampenfabrieken N.V., the Philips Lightbulb Factories. These two brothers had turned a family firm into a corporation, and that set the foundation for the later multinational.

  In the 1920s the company moved beyond lamps and began making vacuum tubes. To support that work, scientists developed a method now called the Van Arkel-de Boer process.

  Then, in the mid-1920s, Philips joined the Phoebus cartel, an alliance with its rivals. The members included Osram, Tungsram, Associated Electrical Industries, ELIN, Compagnie des Lampes and the General Electric companies. Each held shares in a Swiss corporation in proportion to its lamp sales. The group cut its costs and shut out competition. It also standardized bulb life at 1,000 hours, down from 2,500, and it fined any manufacturer whose bulbs burned longer.

  The contrast with later years is striking. In 2011 Philips won a $10 million prize from the United States Department of Energy for an LED replacement for the 60-watt incandescent bulb. That bulb used just 10 watts and gave slightly more than 900 lumens. It reached shops in April 2012.

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• 3. Shortwave and Stirling

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  On the 11th of March 1927, Philips began broadcasting. Its shortwave station PCJJ, later renamed PCJ, went on the air that day. A sister station followed in 1929, called Philips Omroep Holland-Indie, or PHOHI for short. It spoke Dutch to the Dutch East Indies, today's Indonesia. Later it added English and other languages for the Eastern hemisphere, while PCJJ reached the rest of the world in English, Spanish and German.

  A Sunday program that began in 1928 became the stars of the schedule. Its host was Eddie Startz, and the show was called Happy Station. It grew into the longest-running shortwave program in the world. In the early 1930s Philips also introduced the Chapel, a radio with its loudspeaker built in.

  The German invasion in May 1940 cut these broadcasts off. Occupying forces seized the transmitters at Huizen. They used them for pro-Nazi programs, some coming from Germany and some made up of concerts by Dutch broadcasters under German control. After liberation the two shortwave stations were nationalized in 1947 and renamed Radio Netherlands Worldwide. Happy Station survived the change and kept going on the new network.

  Radio also led Philips into an unlikely side project. In the early 1930s, managers wanted to sell radios in regions with no electricity or only scarce batteries. They asked their research lab to compare power sources for a small portable generator. The engineers chose the almost forgotten Stirling engine. It ran quietly, caused little radio interference and could burn ordinary lamp oil, described as cheap and available everywhere.

  Their first experimental engine delivered 16 watts of shaft power. Development carried on through the Second World War. By the late 1940s the Type 10 was ready, and the subsidiary Johan de Witt in Dordrecht built it into a generator set. The finished product, the MP1002CA or Bungalow set, produced 180 to 200 watts of electricity. A first batch of 250 was planned in 1951, but the sets could not be made at a competitive price. Transistor radios, which sipped far less power, removed the original reason for the machine. Only about 150 were ever built.

  Philips kept experimenting with Stirling engines until the late 1970s. The one real commercial success was a cryocooler, which ran the engine in reverse. The company filed many patents along the way and later licensed its knowledge to others.

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• 4. Flight and Occupation

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  On the 9th of May 1940, the Philips directors learned that Germany would invade the Netherlands the next day. Anton Philips and his son-in-law Frans Otten, with other family members, left for the United States. They took a large amount of the company's capital with them. From America they ran the business through the war as the North American Philips Company. On paper, the company was also moved to the Netherlands Antilles to keep it out of German hands.

  Back in Eindhoven the factories became targets. On the 6th of December 1942, the British RAF No. 2 Group carried out Operation Oyster. It badly damaged the Philips Radio factory, yet few Dutch workers or civilians were killed. The RAF bombed the Philips site in Eindhoven again on the 30th of March 1943.

  One family member stayed behind. Frits Philips, the son of Anton, remained in the Netherlands for the whole of the war. He persuaded the occupiers that 382 Jewish people were indispensable to production at Philips, and that argument saved their lives. In 1943 he was held for several months at the Vught internment camp for political prisoners, because a strike at his factory had cut output. In 1995 Yad Vashem recognized him as Righteous Among the Nations.

  After the war the company moved its headquarters back to Eindhoven. In 1961, Frits became its chief executive.

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• 5. Tapes and Discs

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  The year 1963 brought the compact cassette, and it was a wild success. At first, offices used it in dictation machines for typists, and professional journalists used it too. As the sound improved, it became a way of recording music, and it joined vinyl records as the second mass medium for selling recorded music. In 1966 Philips introduced the first portable radio with a cassette recorder built in. It was marketed as the radio recorder, a machine now better known as the boombox.

  The cassette kept finding new jobs. It went into telephone answering machines, including a special version with an endless loop of tape. In the 1970s and 1980s, it served as the first mass storage device for early personal computers. Philips shrank it into a mini-cassette for professional dictation, which dominated until digital machines took over.

  Video was a harder fight. In 1972 Philips launched the world's first home videocassette recorder in Britain, the N1500. Its bulky tapes held 30 or 45 minutes, and later 1-hour tapes appeared. Sony's Betamax and the VHS group were now competing, so Philips brought out the N1700, which doubled the recording time. For the first time, a 2-hour film could fit on one cassette. In 1977 a promotional film for the system featured the comedy writer and presenter Denis Norden.

  Japanese makers quickly copied the idea and sold cheaper tapes. Philips tried one last standard, Video 2000. Its tapes worked on both sides and held 8 hours in total. But Philips sold only PAL systems in Europe, while its Japanese rivals sold worldwide. Their advantage of scale proved too large, and Philips withdrew Video 2000 and joined the VHS Coalition.

  A similar story played out with the LaserDisc. Philips developed one early but held back its launch, fearing it would hurt video recorder sales. It later teamed up with MCA to launch the first commercial LaserDisc standard. Then, in 1982, Philips and Sony launched the compact disc. That format grew into the CD-R, CD-RW, DVD and Blu-ray, which Philips launched with Sony in 1997 and 2006 respectively.

  The partnership with Sony also produced CD-i, billed as a new way of interacting with a television. After weak sales Philips repositioned it as a games console, but gamers criticized it heavily, and it soon ended.

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• 6. Many Names in America

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  On the 19th of January 1943, a United States court ruled in the case of Philco Corporation v. Philips Mfg. Co. The judges found that the two names sounded too alike and could confuse shoppers. From then on, Philco could stop Philips from putting its own name on products sold in America. The Dutch company adopted Norelco instead, short for North American Philips Electrical Company. It used that name for all its American goods until 1974.

  That year Philips bought the Magnavox company and relabeled its American consumer electronics as Magnavox. Norelco stayed on its other products. When Philips bought Philco in 1981, the obstacle disappeared and it could use its own name across the United States. It still kept Norelco for personal care appliances and Magnavox for economy-priced electronics.

  By the mid-1980s the company sold under Magnavox, Sylvania, Philco, Norelco and even Philips. It held 10 percent of the American color television market and 9 percent of the compact disc player market. Its share of video cassette recorders was also 9 percent, although the VCRs were made by Matsushita.

  In December 1986, Philips took direct control of its American units, the North American Philips Company and the Signetics Corporation. A trust set up during the Second World War, and controlled by Philips, had legally owned them until then. The company tightened its operations and centralized planning. The goal was to avoid being, in its own words, picked off piecemeal by the Japanese.

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• 7. Decline and Reinvention

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  In 1990 Philips lost more than US$2 billion, the biggest corporate loss in Dutch history. Through the 1980s its profit margin had fallen below 1 percent. That year the new chief executive, Jan Timmer, sold off the computer businesses, ending Philips Data Systems. Digital Equipment Corporation acquired them in 1991. In the same year the company became Philips Electronics N.V., and North American Philips was dissolved.

  A move followed. The officers decided in 1997 to shift headquarters from Eindhoven to Amsterdam, and the name Koninklijke Philips Electronics N.V. was finalized on the 16th of March 1998. In 1997 Philips also introduced a 42-inch flat-panel television using Fujitsu plasma displays, the first large one sold commercially. Other parts of the group were dismantled instead. PolyGram, its music, television and film division, was sold to Seagram in 1998. In 1984 the chip-equipment activities became a joint venture with ASM International called ASML. Over the years, ASML became the world's leading maker of chip production machines.

  In the 2000s Philips shifted toward health. It bought Optiva, the maker of Sonicare toothbrushes, in 2000. In 2001 it acquired the Healthcare Solutions Group of Agilent Technologies for 2 billion euros. In 2006 it paid $750 million for Lifeline Systems. On the 21st of December 2007 it agreed to buy Respironics for US$66 per share, a total of about 3.6 billion euros.

  Meanwhile the old core was sold. The semiconductor division became NXP Semiconductors in 2006, when a consortium including KKR, Silver Lake Partners and AlpInvest Partners bought a controlling 80.1 percent stake. In 2012 Philips announced it would sell or demerge its television manufacturing to TPV Technology. A planned sale of the audio and video operations to Funai Electric for 150 million euros collapsed in 2013, and an arbitration court later awarded Philips 135 million euros in compensation.

  Frans van Houten became chief executive in 2011 and drove the shift in earnest. The lighting division was spun off in 2016 and later renamed Signify. Hillhouse Capital bought the domestic appliances unit in 2021 for $4.4 billion, and that business, now called Versuni, sells small appliances under license.

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• 8. Recalls and Ventilators

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  In April 2020, the United States Department of Health and Human Services signed a contract with Philips Respironics for 43,000 Trilogy Evo hospital ventilators. Demand surged internationally during the COVID-19 pandemic. Philips raised its ventilator production fourfold within five months, with workers running factories around the clock in places such as Western Pennsylvania and California.

  The deal drew scrutiny. ProPublica published a series of articles on the contract, which the trade adviser Peter Navarro had negotiated. The United States House of Representatives opened an investigation in response. Lawmakers reported evidence of fraud, waste and abuse, and concluded that the government had overpaid Philips by hundreds of millions.

  A more damaging problem came in June 2021. Philips announced a voluntary recall of several Respironics ventilators, BiPAP and CPAP machines. Foam meant to dampen noise and vibration could degrade, and patients might breathe in particles or certain chemicals. The recall covered around 3 to 4 million machines. Philips first called the risks potentially life-threatening, though it said no deaths had been reported. Since then, the FDA has received 385 reports of death allegedly caused by the foam.

  In 2023 ProPublica and the Pittsburgh Post-Gazette reported that Philips had received thousands of patient reports and returned machines as far back as 2010. Many, the reporting said, were not disclosed to the FDA as the law required. In October 2022 dozens of lawsuits were consolidated into a single class action. Philips settled it in September 2023 for at least $479 million.

  The recall cut the company's market value by more than half in a year, and in 2022 van Houten announced he would step down after 12 years. Roy Jakobs replaced him on the 15th of October 2022. In 2023 Philips announced 6,000 job cuts after losing 1.6 billion euros in 2022, in addition to 4,000 announced earlier. That August the Agnelli family's holding company, Exor N.V., took a 15 percent stake worth roughly 2.6 billion euros.

  In January 2024 Philips agreed with the FDA to stop selling new sleep apnea devices in the United States. Jakobs said meeting the conditions at its American plants could take five to seven years.

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