Philips and Neusoft Officially Launch Joint Venture on Medical Systems

International and domestic giants joint forces to construct leadership in the global medical market.

“A manufacturing and R&D joint venture established which has major impact to economy to mid-range market in China ”

June 23, 2004, Beijing--The joint venture by Royal Philips Electronics (AEX: PHI, NYSE: PHG) or “Philips,” of the Netherlands and China Neusoft Group or “Neusoft,” was officially launched today under the name of Philips and Neusoft Medical Systems Co., Ltd.. Over 30 senior officials from the central and provincial governments , and Dutch Embassy gathered for the ceremony today with industry associates to witness the official launch ceremony.

Located in Shenyang of Northeast China, the joint venture has registered capital of about US$30 million, which is equivalent to RMB about 250 million. Philips holds 51% of that capital share and Neusoft Digital Medical Company holds 49%. The R&D and manufacturing joint venture represents a breakthrough for Philips and Neusoft medical activities in China , which enables both parties to expand their R&D and manufacturing capabilities with a broader portfolio of medical equipment.

Both partners will benefit from the win-win partnership, as Neusoft will not only benefit from Philips' experience with the most advanced technologies and management skills, but also have access to opportunities for much needed internationalisation. By joining forces with a local industry leader, Philips can quickly deploy its strategy for the market in China and gain a direct link to a long-term supply of skilled workforce as well as R&D talent, with the aim to build the new JV into a global competence center of Philips for economy to mid-range products.

Philips and Neusoft Medical Systems Co. Ltd. will begin developing and manufacturing computed tomography (CT), MR, Ultrasound and x-ray equipment, based on Neusoft Digital Medical Systems previous production capabilities and product designs from both houses. Both parties will retain their own brands, sales forces and service networks, in the meantime bring with them the understanding of different aspects of the medical systems business.

Dr. Liu Jiren, Chairman and CEO of Neusoft, said at the launch ceremony and press conference: “The cooperation marks the crusade of full-scaled internalisation of Neusoft Digital Medical Systems. By partnering with Philips in the areas of technology, management and marketing, we will not only be able to build up the competitiveness of Neusoft in domestic medical systems market, but also enhance our capabilities in the process of expanding global market.”

Dr. Martin Schuurmans, Executive Vice President of Philips Medical Systems, feels “Philips and Neusoft will take full advantage of their partnership to offer even more cost-effective advanced medical solutions for China and the rest of the world. By joining forces with Neusoft, Philips will leapfrog into the high-growth medical equipment market in China and sharpen the competitive edge by tapping into local know-how of applications for that market. In the meantime, expanding our base in China will also help us to serve international markets in Asia Pacific, South America and East Europe.”

“China has the potential to make a major contribution to Philips' top-line growth,” said David Chang, CEO of Philips China , “the cooperation with Neusoft marks the major breakthrough of Philips Medical Systems in China market, we expects the Medical Systems business to be a dramatic driver for growth in China.”

According to the Ministry of Health, the public medical and health services remain as one of the most important pillars for social development and sustainable growth. This JV will provide the advanced medical equipments and solutions for the Chinese medical industry and enhance the Chinese R&D capabilities in the mid-range medical apparatus market.

As China 's economy continues to grow and as Chinese people continue to pay more attention to the healthcare industry, the medical market will experience a $1.7 billion US growth (which is an annual growth by about 10% by 2006). The investment made by the Chinese government in the medical equipment market has already experienced an annual increase of 13%. China has become the world's third largest medical market, following the United States and Japan. However, it is expected to overtake Japan in the next five to ten years, becoming the world's second largest medical market.

Statistics show that the medium and economy market products hold 75% of the Chinese medical market and 45% of the global medical market. Moreover, these products show an annual growth rate of 15% in China and 8% in the worldwide market. As the trend continues the mid-to- economy range products will soon become the mainstream in the medical market.

Centered on Shenyang , Liaoning Province has developed an economic zone with many emerging industries and markets, convenient transportations and infrastructure. Li Wancai, Vice Governor of Liaoning Province, hailed: “this partnership will exert a positive impact to boost the economic revitalization of Northeast China .” Chen Zhenggao, the Mayor of Shenyang Municipality, stated: “This cooperation is a wise decision to achieve win-win for Shenyang has developed over decades a solid foundation for manufacturing with capable engineers and management talents.”

Extensive training is now being provided to ensure that the JV can run with the same manufacturing efficiency as Philips' other medical production sites and products are up to international standards. This will include on-site training of key managers and engineers as well as further improvement of ongoing quality controls. It is predicted to maintain an annual growth rate of 30% during the next five years. It is expected that by 2008 the JV will be doing the R&D and manufacturing of over 10 categories and 50 different kinds of products. The JV will export their products to the overseas market, especially to the emerging markets that have strong demands for medium and economy products (i.e. South America and East Europe ).

About Neusoft Group Co., Ltd.

Neusoft Group is a leading software and solution provider in China. This is a company originated from Northeastern University. It focuses on three core operations: software and service, IT education & training, and digital medical care product & solutions. It now has more than 6,000 employees, 7 R&D centers, 3 training bases and covers over 40 cities in China with its sales and service network. Total assets amounts to RMB 4.6 billion. In 2003, the company had sales revenue of RMB 2.2 billion. For more information please visit www.neusoft.com .  

About Royal Philips Electronics

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is the biggest electronics companies of Europe , with sales of EUR 29 billion in 2003. It is a global leader in color television sets, lighting, electric shavers, medical diagnostic imaging and patient monitoring, and one-chip TV products. Its 165,300 employees in more than 60 countries are active in the areas of lighting, consumer electronics, domestic appliances, semiconductors, and medical systems. News from Philips is located at www.philips.com/newscenter.

Safe Harbor Statement

This release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.  

For further information:

Philips

Mr. Andre Manning
Philips Corporate Communications
Andre.manning@philips.com
Tel: + 31 20 5977 199
Fax: +31 20 5977 210

Heidi Wilson
Philips Medical Systems
Tel.: +1 978 659 7302
Email: heidi.wilson@philips.com

Sharon Tang
Philips China Corp. Communications
Tel: +86-010-6517-2288-3080
Email: Sharon.tang@philips.com

 

Neusoft Group Ltd.

Hou Ning
Neusoft Branding & Culture Center
Tel.: +86-24-8366-5661
Email: houn@neusoft.com

Yang Jiping
Neusoft Branding & Culture Center
Tel: +86-24-8366-5662
Email: yangjp@neusoft.com