Philips Semiconductors Becomes NXP; Fifty Years of Innovation and a Rich IP Portfolio Firmly Establishes NXP as Europe's Second Largest Semiconductor Company

BERLIN--Sept. 1, 2006--Philips Semiconductors CEO Frans van Houten today revealed the company will move forward as NXP, marking a milestone in its 53 year history as it becomes independent from Royal Philips. The name change announcement follows an agreement between Royal Philips and Kohlberg Kravis Roberts & Co. (KKR), Bain Capital, Silver Lake Partners, Apax and AlpInvest Partners NV that will see the consortium take an 80.1 percent stake in the semiconductor operation with Philips retaining a 19.9 percent interest. NXP is Europe's second largest semiconductor company and a global top 10 player.

Speaking at the Internationale Funkausstellung (IFA) consumer electronics show in Berlin, Mr. van Houten explained that the company's 'vibrant media' brand promise reflects its leadership in media technologies that enable better sensory experiences for consumers such as superior image and sound quality in digital televisions, mobile phones and other entertainment products.

"Today we take control of our own destiny and start to shape the future of the semiconductor industry. We enable our customers to build better products, based on our next generation vibrant media technologies," said Mr. van Houten. "NXP stands for Next Experience. Put simply, we're enabling the next generation of consumer entertainment products. In order to emphasize the rich heritage that NXP gained from 53 years as part of Royal Philips, the NXP name will be supported by the tagline founded by Philips."

Derek Lidow, CEO of iSuppli said, "This largest technology leveraged buyout ever will create a real semiconductor powerhouse. Armed with its independence, and starting out as Europe's second largest semiconductor company, the management team has clearly just started re-writing the history books."

Commitment to Business Renewal Strategy Confirmed

Mr. van Houten confirmed that NXP will continue its current business renewal strategy, which has been underway for 18 months and has contributed to sustained profitability and cost savings, as a strong foundation for the future.

The new shareholders support the continuation of the strategy of NXP, which is driving for leadership in five markets on which the company focuses: Automotive, Identification, Home, Mobile and Personal, and Multimarket Semiconductors. This will be achieved through investment of one billion Euro in R&D, the asset light manufacturing strategy, a strong customer focus, the enormous talent base among its 37,000 employees, and the continued Business Renewal Program.

Explaining the financial structure of the equity funding, Mr. van Houten confirmed NXP will have over 1.2 billion Euro in cash and credit reserves. This financial buffer will also enable the company to explore options for acquisitions.

Mr. Johannes Huth from KKR, the leading partner in the private equity consortium, added: "We were attracted to a world class business with a global scale and presence. NXP is leading in markets with strong growth characteristics, for example Near Field Communication and digital TV. The business renewal strategy is a strong foundation for future growth, and we look forward to supporting the existing management team as it continues to add value to this business."

A center dedicated to emerging technologies has been established within NXP with close to 600 scientists joining from Philips Research and Applied Technologies, ensuring continued innovation. In total, NXP now has over 6,700 engineers in research & development. NXP will remain headquartered in Eindhoven, the Netherlands.

"We want to be a leader in everything we do," said Mr. van Houten. "NXP already has number one market share in areas such as TV chips, contactless identification for e-passports, RFID for electronic ticketing in public transport, car radio digital signal processors and key mobile phone system solutions."

About NXP:

NXP is a top 10 semiconductor company founded by Philips more than 50 years ago. Headquartered in Europe, the company has 37,000 employees working in 20 countries across the world. NXP creates semiconductors, system solutions and software that deliver better sensory experiences in mobile phones, personal media players, TVs, set-top boxes, identification applications, cars and a wide range of other electronic devices. News from NXP is located at www.NXP.com.

Chief Executive Frans van Houten will be hosting a press call at 11.00 CET on Friday 1 September to answer questions about the new company. To receive dial in details for this call please send an email to Press.office@text100.co.uk.

For further press information, please contact:

Europe: Heather Drake            Greater China: Terry Chiang
        Tel. +31 40 27 65949                    Tel. +886 2 3789 2821
        heather.drake@nxp.com                   terry.chiang@nxp.com

USA:    Paul Morrison            APAC:          Mark Chisholm
        Tel. +1 408 474 5065                    Tel. +81 3 3740 4792
        paul.morrison@nxp.com                   mark.chisholm@nxp.com

PLEASE DO NOT PRINT THESE CONTACT DETAILS IN YOUR PUBLICATION

Forward-looking Statements

This release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of NXP and certain plans and objectives of NXP 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.