Sustaining profitable growth through collaboration and partnership

Indro MukerjeeExecutive Vice President Marketing and Sales and Chief Marketing Officer

Philips SemiconductorsFinancial Analysts Day 2004

Semiconductors 2

Agenda:the four key elements of our go to market approach

A clearvalue

propositionand strong brand

Collaborativepartnerships

Value chainpartnerships

World classservices

Semiconductors 3

Consumer&

MultimediaMobile Distribution

& EMS

Europe NorthAmerica APAC China

3 Global Key Account Groups

Taking products / solutions to market and gathering inputs from the market

3 Regions & China

Application teams, engineering labsand field marketing

Customer Partnership Centers

Global Brand Communications & PR

Semiconductors 4

A clear value Proposition and strong brand

Semiconductors 5

The new Philips Brand Positioningfundamental to our value proposition

• Philips is committed to delivering products and solutions that are easy to experience, advanced and designed around you

• The brand promise sense and simplicity underlines Philips’ mission to improve the quality of peoples lives through the timely introduction of meaningful technological innovations

Semiconductors 6

For Semiconductors, the brand positioning

• Underpins our commitment to deliver flexibility, innovation and fast time to market to our customers

• Translates to a continued focus on customer intimacy - collaboration, service strategy, and partnership

Semiconductors 7

How we deliver on our value proposition:Going to market to enable the Connected Consumer

In 2001, we started our customer intimacy journey

Increasing competitiveness byenhancing

• Our business processes

• The competence of our people

• Our geographical approach

Semiconductors 8

Overall go to market process in tune with customer needs

• We present one face to our global customers, including across all Philips divisions

• Key Account Manager has full responsibility and is empowered to represent Philips

Semiconductors 9

Business process improvements to increase focus in sales

• Customer selection process– Making sure we focus on the right

customers

• Determining service level agreements for our customers

• Executive sponsorship to drive customer intimacy

• Customer Business Plan to drive partnership

Semiconductors 10

Business process improvements to increase focus in sales

• Customer Loyalty Program

– Customer Business Balanced Scorecards

• Constantly measuring quality

– Customer intimacy portal

– Vendor rating

• Measuring through Process Survey Tool (PST)

Semiconductors 11

Vendor rating development

• Total score increased from 78 in Q1 to 79 in Q2

– Business fulfilmentscore increased with 2 points to 80

– Business creationincreased with 1 point to 78

– Quality increased aswell with 1 point to 80

65

67

69

71

73

75

77

79

81

83

85

2001Q4

2002Q1

2002Q2

2002Q3

2002Q4

2003Q1

2003Q2

2003Q3

2003Q4

2004Q1

2004Q2

Score

Semiconductors 12

Investing in competence of our people to make stronger impact in the market

• Taking Nexperia to market requires a specific skill set– Strategic Selling: Enabling Processes to evaluate and

strategise opportunities at customers– Project Management training

• Key Account Management– Increased number of VP level Key Account Managers– Integrated cross functional teams selling and delivering

to our customers

• Marketing Speaker’s Bureau– Leveraging marketing knowledge in our company

Semiconductors 13

Supported by geographical moves tuned with market dynamics

• Global – Regional

• Shift from West to East

• Expansion in Asia Pacific– Focus on Greater China

• Management of global design inand production flows

Semiconductors 14

Inviting customers in our kitchen

• Taking customers to Crolles2 resulting in greater confidence

• Increasing number of dedicated customer events• Corporate Research Exhibition

– Sharing insight into future competitive-edge solutions– Close to 100 delegates attended

Dedicated customer eventsCorporate Research Exhibition Taking Ericsson to Crolles2

Semiconductors 15

Giving support through customer oriented communications

• Focused messages towards our customers

• Brand Communications– Doing dedicated customer events, increased by over 25% in 2004– Customer value proposition through targeted messaging

• Public Relations– Stimulate the market with technology adoption stories, such as

NFC and RFID, to increase demand– Demonstrate tangible customer successes with Nexperia design

wins to generate further customer buy-in

From “product focused” to “customer focused’’

Semiconductors 16Volume of coverage for the periods Feb 16- April 20, 04 (Q1) and April 21-July 18, 04 (Q2)

TI35.1%

Motorola20.0 %

Fairchild7.8%

STM16.4%

Philips20.7%

Share of Voice Q1

TI27.7%

Motorola17.9 %

Fairchild6.4%

STM19.0%

Philips28.9%

Share of Voice Q2

Philips’ share of voice increased eight points in Q2

Semiconductors 17

Collaborative partnerships

Semiconductors 18

Results in collaborative partnerships

• FlexRay Consortium – drive the adoption of an open standard for high-speed bus systems in automotive

• NFC – Philips, Sony and Nokia drive adoption for NFC standard – Samsung integrates technology into handsets

• Nexperia Home Partnership program with ISVs

• UHAPI standard established by Samsung and Philips

• T3G – our JV platform for 3G services in China with Samsung and Datang

Semiconductors 19

Value chain partnerships

Semiconductors 20

Component Supplier

ODM

EMS

OEM

Network operators

Broadcast

Retail/

Operators/

Content

Consumer

Independent Software Vendors

Create the right connections in the value net

Semiconductors 21

World class services

Semiconductors 22

Supported by world class service

• Customer intimacy– Dedicated service breakthrough programs,

driving service excellence

• Global consistency– Systems and addressing the changing fulfillment

needs of our global customers

• Ease of doing business– Customer dedicated web-portals/extranets– B2B information exchange via Rosetta Net– Collaborative Planning solutions with Global Distribution

• Flexibility & Reliability– Global logistics network delivering shorter

lead times and increased responsiveness– Resulting in improvement of our stacked lead time

by 35% between 2002 and 2004

Semiconductors 23

We are constantly measuring our organizationto improve and reinforce a culture of excellence

• Marketing & Sales is– Committed to excellence– Recognized for

excellence

…and is at…

European QualityAward Level

Semiconductors 24

% s

ales

from

key

cus

tom

ers

Q12002

Q22002

Q32002

Q42002

Q12003

Q22003

Q32003

Q42003

Q12004

Q22004

61

64

61

62

60

61

5858

5757

52

54

56

58

60

62

64

66

Increase share of business from key customers Target 70% by end 2005

Semiconductors 25

Increasing our success rate in design wins

Semiconductors 26

In summary

We have the right ingredients for success

A clearvalue

PropositionAnd strong brand

Collaborativepartnerships

Value chainpartnerships

World classservices