Japan and the PC Revolution
The personal computer revolution appeared to offer a tremendous opportunity for Japan. Combining their strengths in electronic components with their growing capabilities in computer technology, the Japanese computer makers appeared likely to become major competitors in the global PC industry. In fact, some in the United States expected that Japanese companies would eventually use their control over upstream components and technologies to dominate the industry. Former U.S. Trade Representative Clyde Prestowitz, predicted that the Japanese would run away with the world computer market. 1 Intel's Andrew Grove predicted that Japan would overtake the United States as the dominant world supplier of computer systems by 1992. 2 What few suspected was that the PC revolution would so change the nature of the computer industry that many of the presumed strengths of the Japanese companies would turn out to be liabilities in the PC industry.
Japanese companies did succeed in controlling the market for many PC components and peripherals, including DRAMs, flat-panel displays, and floppy disk drives, as well as many key subcomponents and materials. But for the most part they failed to build on those strengths to compete in the PC systems market. They were also unable to use their strength in DRAMs and other semiconductors as a base for challenging Intel's dominance in microprocessors and were locked almost entirely out of the PC software market. While Japan's computer hardware production grew rapidly, its companies were largely relegated to the decreasing returns segments of the industry.
Japanese companies are still world leaders in many components and peripherals, but their leadership has been challenged by aggressive competitors elsewhere in Asia. In 1996, a decade after driving Intel and other U.S. companies out of the DRAM business, Japan was passed by Korea as the leading producer of DRAMs. Korea's electronics companies were also gearing up for a challenge in flat-panel displays, another Japanese stronghold. Meanwhile, Taiwan had become so adept at producing PCs and components that Japan's