Philips
The company that invented half of what you use — and then gave it all away
By VastBlue Editorial · 2026-03-26 · 20 min read
Series: How We Got Here · Episode 4
The Lamp Factory
In 1891, Gerard Philips — a twenty-eight-year-old mechanical engineer who had studied in Glasgow and worked briefly at a small incandescent lamp factory in the east of the Netherlands — persuaded his father, a banker and tobacco merchant in Zaltbommel, to finance a modest venture. The plan was simple, almost comically so by the standards of what the company would become: manufacture carbon-filament incandescent lamps in a former buckwheat mill on the outskirts of Eindhoven, a small market town in the southern province of Noord-Brabant with a population of roughly five thousand. The town had no particular industrial heritage. It had no university. It had no navigable waterway or major railway junction. What it had was cheap labour, available buildings, and a location close enough to Belgium and Germany to make cross-border trade feasible. It was, by every rational criterion, an improbable place to build one of the most consequential technology companies in European history.
The early years were difficult. Gerard Philips was an engineer, not a salesman, and the European lamp market of the 1890s was crowded, price-competitive, and increasingly dominated by cartels. The company nearly failed within its first two years. What saved it — and what would define its trajectory for the next century — was the arrival of Gerard's younger brother, Anton. Where Gerard was precise, methodical, and technically absorbed, Anton was commercial, strategic, and relentlessly expansive. The division of labour was immediate and complete: Gerard ran the factory and the technology, Anton ran everything else. It was a partnership that would last decades, and it established a duality — deep technical capability coupled with aggressive commercial ambition — that became the company's defining characteristic.
By 1900, Philips was one of the largest lamp manufacturers in Europe. By 1910, it was among the top three globally, alongside General Electric in the United States and Osram in Germany. The growth was driven by relentless cost reduction, continuous improvement in filament technology — the transition from carbon to tantalum to tungsten filaments was a technical arms race that Philips pursued with methodical intensity — and Anton's ability to build sales networks across Europe, Russia, and eventually Asia. But what distinguished Philips from dozens of other successful lamp companies was a decision that Gerard and Anton made in 1914, a decision that would have consequences neither of them could have foreseen: they built a physics laboratory.
The NatLab: A Factory for Discoveries
The Natuurkundig Laboratorium — the Physics Laboratory, universally known as the NatLab — was established in 1914 under the direction of Gilles Holst, a physicist who had studied under Heike Kamerlingh Onnes at Leiden, the man who had first liquefied helium and discovered superconductivity. Holst brought with him not just technical expertise but an intellectual culture: the conviction that industrial research should not be limited to solving immediate production problems, but should pursue fundamental understanding of the physical phenomena that underlay the company's products. A lamp was not merely a glass bulb with a wire inside it. It was an exercise in materials science, vacuum physics, radiation theory, and thermodynamics. If you understood the physics deeply enough, you could make better lamps. But you might also discover things that had nothing to do with lamps at all.
This was not an obvious strategy for a provincial lamp manufacturer. General Electric had established its research laboratory in Schenectady in 1900; Bell Labs would be formalised in 1925. But these were divisions of American industrial giants with revenues and ambitions to match. Philips in 1914 was a successful but still relatively small Dutch company, operating from a town that most Europeans could not have located on a map. The decision to invest in fundamental research — not applied development, but research into the basic physics of matter, radiation, and electronics — was either visionary or reckless, depending on whether you evaluated it in 1914 or 1950.
Evaluated from 1950, it was visionary beyond anything Gerard and Anton could have imagined. The NatLab became one of the most productive industrial research laboratories in the world. Its output over the following seven decades reads less like a corporate research log and more like a catalogue of twentieth-century technology.
The intellectual calibre of the NatLab was extraordinary. Hendrik Casimir, who joined in 1942 and eventually became the laboratory's director, had studied under Niels Bohr in Copenhagen and Paul Ehrenfest in Leiden. His prediction of the Casimir effect — a quantum mechanical force between two uncharged conducting plates in a vacuum — became one of the most celebrated results in quantum field theory. Nicolaas Bloembergen, who worked at the NatLab before moving to Harvard, won the Nobel Prize in Physics in 1981 for his contributions to laser spectroscopy. The laboratory attracted and produced physicists of the first rank, not because Eindhoven was a glamorous posting, but because the NatLab offered something no university could: virtually unlimited funding to pursue fundamental research, combined with access to industrial-scale manufacturing capabilities that could turn theoretical insights into working devices.
The NatLab's most consequential contribution was not any single invention but the research methodology it embodied: systematic, long-horizon investigation into physical phenomena, conducted with industrial resources and industrial discipline, but without the constraint of immediate commercial application. Holst and his successors understood that the most valuable discoveries are often the ones you were not looking for. Research into gas discharge phenomena — pursued because Philips made gas-discharge lamps — led to expertise in plasma physics. Research into magnetic materials — pursued because Philips made radio components — led to the development of ferrite cores that became essential components in every electronic device from televisions to computers. Research into optical storage — pursued because Philips was looking for ways to store video signals — led to the LaserVision disc, then the compact disc, then the technologies that underpin every optical data storage system in use today.
The Inventions That Shaped Daily Life
The sheer breadth of Philips' inventive output is difficult to grasp without enumeration, and even enumeration understates the impact because it cannot capture the cascading consequences of each innovation.
The electric razor. In 1939, Philips introduced the Philishave, a rotary electric shaver that used a spinning blade behind a perforated guard. The design was fundamentally different from the reciprocating-blade approach used by Remington and other American manufacturers. It was quieter, gentler on the skin, and — critically for Philips' European market — did not require the standardised electrical outlets and voltages that American appliances assumed. The Philishave became one of the most commercially successful consumer products in European history. By the 1960s, Philips was producing millions of units per year in Drachten, a small town in the northern province of Friesland that the company had essentially built around the shaver factory. The rotary shaving head, refined continuously over eight decades, remains in production today.
The compact cassette. In 1962, Lou Ottens — an engineer at the Philips factory in Hasselt, Belgium — led the team that developed a small, portable magnetic tape format that could be used for both recording and playback. Philips introduced the Compact Cassette at the Berlin Radio Show in August 1963. The format was elegant in its simplicity: two small spools of magnetic tape enclosed in a plastic housing roughly the size of a pack of playing cards. What made the cassette transformative, however, was not the engineering but the business decision that accompanied it. Philips licensed the format freely. Any manufacturer could produce cassettes and cassette players without paying royalties. This was not generosity — it was strategy. Philips understood that the value of a recording format lies not in the hardware but in the ecosystem: the more manufacturers that produce players, the more consumers buy them; the more consumers own players, the more record labels release music on cassette; the more music is available, the more players are sold. By giving away the format, Philips ensured that the Compact Cassette became the global standard, defeating competing formats from RCA, Grundig, and others that were technically comparable but commercially proprietary.
Philips licensed the Compact Cassette freely to any manufacturer worldwide. It was one of the most consequential business decisions of the twentieth century: by giving the format away, Philips ensured that it became the universal standard — and then sold more hardware into that standard than anyone else.
Editorial observation
The compact disc. If the cassette was Philips' greatest act of strategic generosity, the CD was its greatest act of technical collaboration. In the late 1970s, Philips and Sony — competitors in virtually every consumer electronics market — agreed to jointly develop a digital optical disc format for audio. The collaboration was driven by mutual necessity: neither company could establish a global standard alone, and the failure of competing analogue videodisc formats (Philips' own LaserVision, RCA's SelectaVision) had demonstrated the commercial catastrophe of format wars. The result, finalised in 1980 and commercially launched in 1982, was the Compact Disc Digital Audio — a 12-centimetre polycarbonate disc read by a semiconductor laser, capable of storing 74 minutes of digitally encoded audio with no degradation from repeated playback.
The technical specifications were genuinely the product of joint engineering: Philips contributed the optical system — the laser, the disc substrate, the error-correction encoding — while Sony contributed the digital audio encoding and signal processing. The famous story is that the disc's 74-minute capacity was chosen to accommodate Beethoven's Ninth Symphony, at the insistence of Sony's Norio Ohga, a trained opera singer. The resulting Red Book standard defined a format that would sell over 200 billion discs worldwide and generate the revenue stream that funded the music industry's last great era of profitability.
X-ray technology and medical imaging. Philips' involvement in medical technology began almost as early as its involvement in lighting. The physics of X-ray generation — the production of high-energy photons by accelerating electrons into a metal target — shares fundamental principles with the physics of incandescent lighting: both involve the controlled manipulation of electrons and the management of heat in vacuum-sealed enclosures. Philips began manufacturing X-ray tubes in 1918, leveraging its expertise in vacuum technology and glass-to-metal sealing. By the 1930s, the company was a major supplier of medical X-ray equipment across Europe. This early position in medical imaging deepened over decades: from conventional X-ray to fluoroscopy, from fluoroscopy to computed tomography (CT), from CT to magnetic resonance imaging (MRI), from MRI to interventional radiology and image-guided therapy. Philips Healthcare — now the company's largest division — is today one of the three dominant global players in diagnostic imaging, alongside GE HealthCare and Siemens Healthineers.
The Eindhoven Ecosystem
The story of Philips cannot be told as the story of a single company, because Philips did not remain a single company. It became an ecosystem — a dense network of suppliers, spin-offs, research institutions, and independent firms that radiated outward from Eindhoven and eventually constituted one of the most productive technology clusters in Europe.
The process began with the workforce. Philips' factories in Eindhoven, Drachten, Nijmegen, and elsewhere across the Netherlands employed tens of thousands of engineers, technicians, and skilled workers over the course of the twentieth century. These workers acquired skills, knowledge, and professional networks that were specific to advanced manufacturing: precision mechanics, thin-film deposition, optical engineering, semiconductor fabrication, cleanroom protocols, quality systems. When Philips restructured, downsized, or exited business lines — as it did repeatedly from the 1990s onward — these workers did not disappear. They started companies. They joined suppliers. They moved to competitors. They carried with them the tacit knowledge that Philips had spent decades accumulating, and they dispersed it across the Dutch technology sector.
The institutional infrastructure was equally important. Philips was instrumental in the founding of the Technische Hogeschool Eindhoven — now the Eindhoven University of Technology (TU/e) — in 1956. The company needed a local source of trained engineers; the Dutch government needed to expand technical education; the result was a university that was, from its inception, oriented toward industrial application in a way that older Dutch universities were not. TU/e became a pipeline: Philips researchers taught courses, supervised doctoral students, and collaborated on research projects. Graduates flowed into Philips and its supplier network. The university's research agenda was shaped, though not dictated, by the industrial problems that surrounded it. Today, TU/e consistently ranks among the top European universities for engineering and technology, and its campus is physically adjacent to the High Tech Campus Eindhoven — the former NatLab site, now an open innovation campus housing over 235 companies and 12,000 researchers.
But the most consequential spin-offs were not small startups. They were industrial companies of global significance, born directly from Philips' technology base.
- NXP Semiconductors — spun off in 2006, now a $50 billion company and the largest European-headquartered semiconductor firm, supplying NFC chips in billions of devices worldwide.
- ASML — founded as a Philips-ASM joint venture in 1984, now the sole manufacturer of EUV lithography systems and one of the most strategically important companies on Earth.
- Signify — the world's largest lighting company, spun off in 2016, carrying forward the business that started it all.
- TP Vision — Philips' television operations, now a joint venture with Chinese manufacturer TPV.
- High Tech Campus Eindhoven — the former NatLab site, now an open innovation campus housing 235+ companies and 12,000 researchers.
NXP Semiconductors. Philips had been manufacturing semiconductors since the 1950s, building on the NatLab's solid-state physics research. By the 1990s, Philips Semiconductors was one of the largest chip divisions in Europe, producing integrated circuits for applications ranging from mobile phones to automotive systems to smart cards. In 2006, Philips sold the division to a private equity consortium, which renamed it NXP and took it public. NXP is today a $50 billion company by market capitalisation, the largest European-headquartered semiconductor firm by revenue, a global leader in automotive chips and secure identification, and the supplier of near-field communication (NFC) chips in billions of smartphones and contactless payment cards worldwide. Every time you tap your phone to pay for a coffee, there is a measurable probability that you are using technology whose lineage traces directly to the NatLab in Eindhoven.
ASML. The story of ASML is the story of Philips' most consequential act of technological creation — more consequential, arguably, than the cassette or the CD, because ASML is now the single most strategically important technology company in Europe and one of the most important in the world. In 1984, Philips and the Dutch chip equipment manufacturer ASM International formed a joint venture called ASM Lithography, based in a temporary building on the Philips campus in Eindhoven. The venture's purpose was to develop photolithography systems — the machines that use light to etch circuit patterns onto silicon wafers, the most critical and technically demanding step in semiconductor manufacturing.
ASML began as a joint venture in a temporary building on the Philips campus. Four decades later, it is the sole supplier of extreme ultraviolet lithography systems and one of the most strategically important companies on Earth. The technology that makes this possible traces directly to decades of optics research in the NatLab.
Editorial observation
Philips contributed the optical technology — lenses, illumination systems, alignment mechanics — that the NatLab had developed over decades of research into optical storage, imaging, and precision measurement. ASM contributed semiconductor process knowledge. The venture nearly collapsed multiple times in its early years; the lithography market was dominated by Nikon and Canon, and the Dutch newcomer struggled to compete on precision, reliability, and delivery schedules. But ASML survived, improved, and — beginning in the late 1990s — made a strategic bet on extreme ultraviolet (EUV) lithography, a technology so difficult that most industry observers considered it impractical. The bet required two decades and billions of euros of development. It succeeded. Today, ASML is the sole manufacturer of EUV lithography systems, machines that cost over €350 million each, that are essential for producing the most advanced semiconductors in the world, and that no other company has been able to replicate. ASML's market capitalisation exceeds €300 billion. Its order book is years long. Its export controls are a matter of geopolitical negotiation between the United States, the Netherlands, and China.
The Philips ecosystem extends further. Signify, the world's largest lighting company, was spun off from Philips in 2016 — the lighting business that had started it all, now an independent company. Philips' television manufacturing operations eventually became TP Vision, a joint venture with the Chinese firm TPV. Philips' audio and video businesses were sold or licensed to various manufacturers. The consumer electronics conglomerate that had been one of the largest in the world systematically disaggregated itself over two decades, shedding businesses that collectively generate hundreds of billions in annual revenue under other names, while the parent company — now Royal Philips — focused on health technology.
The Paradox of Open Innovation
Philips' history presents a paradox that is central to European technology strategy. The company invented or co-invented an extraordinary number of technologies that became global standards. It pioneered industrial research on a scale matched in Europe only by Siemens. It built a technology ecosystem in Eindhoven that is, by some measures, the most productive square kilometre of R&D activity on the continent. And yet Philips itself — the parent company — has not captured the majority of the value created by its own inventions.
The Compact Cassette was licensed freely and became a global standard. The revenue went to Japanese manufacturers — Sony, TDK, Maxell — who produced cassettes and players more cheaply and at greater volume than Philips ever did. The compact disc was co-developed with Sony, which shared equally in the licensing revenue but dominated the consumer electronics market for CD players. The semiconductor division became NXP, an independent company. The lithography joint venture became ASML, a company now worth more than Philips ever was. The lighting business became Signify. The television business was sold. The audio business was licensed.
This pattern — invent the technology, establish the standard, then lose the commercial advantage to competitors or spin-offs who execute more aggressively — is not unique to Philips, but Philips embodies it more completely than any other European technology company. It is the pattern that drives a specific and persistent European anxiety: that European companies excel at research and invention but fail at scaling, commercialising, and capturing the economic rents from their own innovations. The NatLab was world-class. The products were often world-first. But the profits flowed elsewhere.
The explanation is partly structural, partly strategic. Philips operated in a European industrial environment that rewarded engineering excellence and penalised commercial aggression. Its governance prioritised institutional stability, social responsibility, and technological leadership over shareholder returns and market dominance. The company built housing for its workers, funded schools, and maintained cultural institutions in Eindhoven. It was a civic institution as much as a commercial one — an orientation that attracted brilliant scientists but did not produce the ruthless focus on market share and cost reduction that characterised its Japanese and American competitors. Meanwhile, each open-licensing decision — brilliant for establishing standards — left Philips' competitive advantage limited to brand reputation and manufacturing efficiency, advantages that eroded as competitors achieved superior cost positions through larger scale and more aggressive automation.
Eindhoven Today and the Lesson That Keeps Repeating
Eindhoven in 2026 bears almost no resemblance to the market town of five thousand where Gerard Philips set up his lamp factory. The municipality has a population of roughly 240,000, and the broader Brainport region accounts for approximately one-third of the Netherlands' total private R&D spending. Patent applications per capita are among the highest in Europe. ASML alone employs over 42,000 people, the majority in the Eindhoven area. NXP, Signify, Philips itself, VDL Group, DAF Trucks, and hundreds of smaller firms specialising in precision engineering, photonics, and embedded systems create an industrial ecosystem of unusual density.
ASML's EUV lithography monopoly has made Eindhoven one of the most strategically sensitive industrial locations on Earth. No advanced semiconductor can be manufactured without ASML's machines. No ASML machine can be manufactured without the precision optics, mechatronics, and software expertise concentrated in the Eindhoven region. Since 2023, the Dutch government has imposed export controls on ASML's most advanced systems, preventing the sale of EUV machines to China. The decision has made Eindhoven a front-line position in the technological competition between the United States and China — a role that the company and the city neither sought nor can avoid.
A lamp factory founded in 1891 in a town of five thousand people generated a chain of innovation that, 135 years later, has made that town one of the most strategically consequential industrial locations on Earth. No one planned this. No government designed it. It happened because one company decided to build a physics laboratory and then, decade after decade, followed the science wherever it led.
Editorial observation
The Philips story offers several lessons, but one eclipses the others. Industrial ecosystems are not built by policy documents. They are built by anchor companies that invest in fundamental research, train large workforces, build supplier networks, and — over decades — create the dense web of knowledge and capabilities that economists call agglomeration effects. Without Philips, there is no NatLab. Without the NatLab, there is no semiconductor expertise in the Netherlands. Without semiconductor expertise, there is no ASML. Without ASML, there is no chokepoint in the global chip supply chain. Every link in this chain is contingent. Every link depended on decisions that could have gone differently. And the first link — Gerard Philips deciding to make lamps in Eindhoven rather than somewhere else — was, in the grand scheme of things, almost accidental.
What the Philips story demonstrates — and what policy makers consistently underestimate — is the timescale involved. The chain from Gerard Philips' lamp factory to ASML's EUV lithography monopoly spans 135 years. Even the chain from ASML's founding as a struggling joint venture to its current position spans 40 years. Industrial ecosystems do not respond to five-year funding cycles or electoral timescales. They respond to decades of sustained investment, institutional continuity, and the patient accumulation of knowledge that no amount of money can shortcut.
Philips gave away the cassette format and created a global standard. It shared the CD with Sony and created a digital media revolution. It spun off its semiconductor division and created NXP. It seeded a joint venture and created ASML. In each case, the value Philips created far exceeded the value Philips captured. Whether this represents a failure of corporate strategy or the natural dynamics of ecosystem creation is a question that European technology policy has been asking for decades without arriving at a satisfying answer. What is not in question is the scale of what one company, in one improbable town, managed to set in motion — and the fact that the consequences are still unfolding.
Sources
- de Vries, Marc J. "80 Years of Research at the Philips Natuurkundig Laboratorium, 1914-1994." Pallas Publications, 2005. — https://www.aup.nl/en/book/9789085550518/80-years-of-research-at-the-philips-natuurkundig-laboratorium-1914-1994
- Keetie E. Sluyterman. "Dutch Enterprise in the Twentieth Century: Business Strategies in a Small Open Economy." Routledge, 2005. — https://www.routledge.com/Dutch-Enterprise-in-the-Twentieth-Century-Business-Strategies-in-a-Small-Open-Economy/Sluyterman/p/book/9780415350945
- Immink, Kees A. Schouhamer. "The Compact Disc Story." Journal of the Audio Engineering Society, 46(5), 1998. — https://www.aes.org/e-lib/browse.cfm?elib=12191
- ASML. "Our History: From Startup to Global Leader." ASML Corporate Website, 2024. — https://www.asml.com/en/company/about-asml/history
- Brainport Eindhoven. "Brainport Monitor 2024: Regional Economic Performance." Brainport Development, 2024. — https://brainporteindhoven.com/en/discover/brainport-monitor
- European Commission. "European Chips Act." Official Journal of the European Union, 2023. — https://digital-strategy.ec.europa.eu/en/policies/european-chips-act
- Casimir, H.B.G. "Haphazard Reality: Half a Century of Science." Harper & Row, 1983. — https://archive.org/details/haphazardreality0000casi
- Miller, Chris. "Chip War: The Fight for the World's Most Critical Technology." Scribner, 2022. — https://www.simonandschuster.com/books/Chip-War/Chris-Miller/9781982172008