The Financial Times newspaper quotes the President of Philips, Cor Boonstra, as saying that the group had "built too big a production capacity for requirements."

The company currently has 244 production sites in more than 40 countries and employs some 256,000 people.

Within four years Philips wants to cut the number of plants to between 160 and 170, giving outside suppliers a larger role.

A spokesman for Philips said that there were no detailed plans yet which plants will be shut down or sold off, and could not confirm any plans for closures in the United Kingdom.

He said the cuts were part of a long-term process of restructuring.

At the start of the 1990s the company had more than 500 production sites, and between now and the end of this year another 18 will close, bringing down the total to 226 factories.

In 1997 the company had sales worth $39.2bn from about 100 different operations, ranging from consumer electronics to medical instruments and light bulbs to semiconductors.

According to Mr Boonstra the drastic cutbacks would give the company a chance to strike global partnerships with other electronics manufacturers and to expand its operations in areas like semiconductors, medical products and lighting.

"Now we can take our pick where we acquire and grow," he said.

However, Philips is still recovering from its latest joint venture, producing telephones with US manufacturer Lucent.

The Dutch company had hoped to use the deal to break into the North American market, but the plans collapsed when Lucent announced that it was pulling out of the consumer side of its telecom business.

Last week Philips shares fell sharply after Mr Boonstra was quoted as saying that 1999 would be a "very gloomy" year for the electronics industry.