Suspicions of Unfair Competition Fuel US-Japan 'Chip Wars.'
Samuelson, Robert J., American Banker
AFTER STEEL AND autos, are "chips" next? Chips are the semiconductors that are the guts of computers and other electronic products. American chip makers say they're discriminated againist in Japan -- the Japanese firms buy only form each other. Such discrimination, the Americans argue, puts them at a global competitive disadvantage. The Japanese deny it.
The chip war exemplifies why our trade problems are so messy and emotional. They're a deadly combination of nationalism and ignorance. After examining mounds of documents and miles of semiconductor statistics, I can't tell who's right. And therein lies the lesson -- global competition is so disorienting and often enraging because the nature of the competition is so murky.
When two American companies compete, we're usually content to let the market decide who's better. Differences are thought to reflect superior or inferior business performance. But with foreign competition, the suspicion instantly arises that something else is involved, that a foreign firm has an "unfair" advantage from its government or has a protected home market.
If there's an unfair advantage, our natural reaction is to restore "fair" competition by helping the U.S. firm. But the trouble is that the arguments can easily be twisted to obscure genuine competitive differences and to extract injustified government aid. The difficulty of discovering the facts only compounds the problem.
Return to semiconductors. Any threat to this high-tech industry wounds our national pride. Our industry is still the largest, but Japan's is close. In 1984, the U.S. industry accouinted for 54% of $26 billion in worldwide sales, according to the Semiconductor Industry Association (SIA), while the Japanese industry had a 38% market share.
Now comes the SIA with a trade complaint against the Japanese; it wants an "affirmative action" program under which the Japanese government would force its companies to buy more U.S. chips to offset alleged discrimination.
Meanwhile, the U.S. industry rejects import restrictions here because they might not work. American computer firms are large buyers of Japanese chips. If import restrictions raised U.S. chip prices, computer companies might move assembly operations offshore.
Until the mid-1970s, Japan protected its industry by regulating imports and restricting investment by U.S. companies in Japan. But even ending these barriers, the American industry says, didn't end protectionism. Japan's efforts to promote its semiconductors, mainly through research and development subsidies, spawned informal market-sharing arrangements. Japanese firms buy and sell among themselves and turn to U.S. firms only when they do not make specific chips or when supplies are tight.
Consequently, American sales in Japan have maintained a stable market share, fluctuating between 9% and 14% since 1973. Meanwhile, the Japanese market share in the United States has risen rapidly. In 1984, it was 15.7%, according to the SIA. And because the U. …