Philips Korea's sales staggering…shift to service-centric

Sales growth rate remains in the 1% range…facing limitation in the top-line growth

Rebounded with operating profit of KRW 36.4 billion…due to the service-centered restructuring

Shift toward AI and solution…changes to growth structure

Philips Korea’s sales growth, which had been on a recovery trend since 2023, has stalled, with growth rates remaining in the 1% range.

However, during the same period, operating profit increased significantly, showing an actual improvement in profitability. This is interpreted as the result of a shift in the sales mix, moving away from a hardware sales-centric structure toward services, including maintenance and software.

Analysis suggests that amid intensifying competition in the large-scale medical equipment market, the future growth is shifting from hardware to software and solutions.

Sales Growth 'Stalls,' Operating Profit 'Rebounds

According to Philips Korea’s recently disclosed audit report, the company’s sales growth appears to have entered a period of stagnation.

Specifically, sales, which recorded KRW 336.6 billion in 2021, decreased to KRW 316.1 billion in 2022 before rebounding to KRW 352.9 billion in 2023.

Since then, however, sales reached KRW 361.6 billion in 2024 and KRW 364.6 billion in 2025, marking two consecutive years of growth limited to the 1% range following the 2023 rebound, maintaining a slowing growth.

One of the primary reasons for this sales stagnation can be traced back to the large-scale business restructuring carried out in 2021. As of September 9, 2021, Philips Korea completed the divestment of its Domestic Appliances division, which was highly profitable

Philips Korea's 5-Year Sales & Operating Profit: BLUE-Sales, RED-Operating profit (source: audit report, unit: KRW 100 million)

This was part of Philips’ global 'Selection and Concentration' strategy to focus on the healthcare B2B (business-to-business) sector.

Considering that the Domestic Appliances division generated approximately KRW 41.8 billion in annual sales at the time, the separation of this core consumer cash cow is interpreted as a factor in the reduction of the company's overall scale.

In contrast to the slowdown in top-line growth, profitability improved significantly. Philips Korea’s operating profit shifted from KRW 42.7 billion in 2021 to a loss of KRW -4.9 billion in 2022.

After successfully returning to a surplus of KRW 1.8 billion in 2023, profit showed a recovery to KRW 7 billion in 2024, followed by KRW 36.4 billion in 2025, a more than five-fold improvement compared to the previous year.

This indicates that focusing on internal stability and reorganizing the portfolio toward high-value-added businesses, rather than external expansion, has proven effective.

Philips Diversifies the Profit Structure, Shift From Product Sales to 'Service'

The primary reasons for the improvement in operating profit are cost reductions and lower selling, general, and administrative (SG&A) expenses.

The cost of goods sold, which was KRW 270.7 billion in 2024, decreased to KRW 246.3 billion in 2025, and SG&A expenses also fell by approximately 2 billion KRW, from 83.8 billion KRW to KRW 81.8 billion. Essentially, while sales barely grew, profit rose by simultaneously reducing costs and expenses.

Furthermore, the fact that the sales structure is increasing 'service sales,' which provides maintenance and software-linked solutions in addition to equipment delivery, appears to have influenced the improvement in profitability.

Looking at Philips Korea’s sales structure by business segment (item), product sales decreased from KRW 242.9 billion in 2021 to KRW 219.6 billion in 2022, before recovering to ▲KRW 249.9 billion in 2023 and ▲KRW 254.6 billion in 2024.

However, in 2025, product sales recorded KRW 253.6 billion, showing negative growth compared to the previous year.

In contrast, service sales has been on a steady upward trajectory, with no negative growth. Service sales, which was KRW 93.7 billion in 2021, recorded KRW 96.5 billion in 2022, ▲KRW 102.9 billion in 2023 ▲KRW 106.9 billion in 2024 ▲KRW 110.9 billion in 2025.

The share of service sales in total sales also expanded from 27.8% in 2021 to approximately 30.4% in 2025.

Considering the characteristics of the Korean market, where replacement cycles for large medical equipment (MRI, CT, ultrasound, etc.) are long and large-scale orders following the establishment of new hospitals are limited, the expansion of service-oriented sales, such as software upgrades and Service Level Agreements (SLA) for pre-installed equipment, is analyzed to have played a key role in defending profitability.

Philips is expanding its cooperation by signing smart hospital business agreements with major hospitals.

Intensifying Imaging Competition… The Challenge of Growth Drivers

Because of this, Philips Korea is also seeking a breakthrough by creating a digital healthcare environment centered on artificial intelligence (AI) technology.

As global competitors such as Siemens Healthineers and GE HealthCare integrate AI solutions with hardware, Philips is moving to capture the early market.

For example, Philips Korea is establishing smart hospital collaborations focused on AI-based improvements to ultrasound and imaging workflows.

With the recent domestic medical environment emphasizing smart hospitals amid personnel shortages, Philips appears focused on embedding its portfolio, spanning diagnostic imaging·ultrasound·interventional procedure systems, into these systems.

However, expanding the influence of diagnostic imaging equipment, which is the most fundamental driver of external growth, remains a challenge.

In this context, Philips' next-generation spectral CT, the Verida system, which recently received U.S. Food and Drug Administration (FDA) clearance, could potentially provide a way forward.

The core of Verida system is its spectral technology. While most CT scanners focus on providing structural information by imaging the human body at a single energy, spectral CT analyzes differences in tissue composition across multiple energy spectra.

As it promotes clinical efficiency improvement rather than just simple image quality enhancement, there is potential for synergy with future smart hospital system construction.

An official from the medical device industry stated, "While Philips Korea's new products and technological innovations, such as helium-free MRI and cardiac ultrasound, are receiving positive responses, hospital investment decisions are made on a mid-to-long-term basis due to the nature of the market," and added, "The impact of new products is more likely to be reflected in mid-to-long-term trends rather than short-term performance."