Problems with sleeping devices and chip shortages depress sales growth for Philips

Philips production of electric toothbrushes suffered from a shortage of chips in the third quarter of this year.Image Dutch Height / ANP

The main causes, according to Philips, are the recalls of the devices against sleep apnea and problems in the supply chain, including the shortage of chips and other electronic components.

Due to errors in supplied sleep apnea devices, such as crumbling foam particles in air filters that are inhaled by patients, Philips is embroiled in multiple lawsuits. The group writes in its quarterly figures that it is not yet able to give an indication of the amount of possible compensation claims from patients. In total, three to four million devices need to be replaced or repaired. Philips has reserved 500 million euros for this.

The company also suffers from chip shortages, which prevented Philips, for example, from producing enough electric toothbrushes to meet the demand. The shortage of containers and congestion in the ports also led to delays in fulfilling orders.

The company has meanwhile taken the final steps to divest the production of household electronics. This allows the company to fully focus on health technology. “Building on this strength, we have entered into nineteen long-term partnerships with hospitals around the world,” CEO Frans van Houten wrote in a commentary on the quarterly figures.

Van Houten still sees many corona-related uncertainties and expects the company to continue to suffer from this in the last quarter of this year. Sales growth for the entire year will be low, he says. He does expect that, due to increasing orders, the target turnover growth – about 5 percent – ​​will be resumed next year. This quarter’s turnover was 4.2 billion euros, the operating result 512 million euros. In the third quarter of 2020, the operating result was still 684 million euros.

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