JPRS ID: 10662 JAPAN REPORT U.S-JAPAN VLSI WAR

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• Content Type: REPORTS

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JP~S L/ 10662
16 July 1982
Ja an RP ort
p ~
CFOU~ ti~2/82~
U. S. - JAPAN VLSI WAR

~
Fg~$ FOREIGN B~OADCAST INFORMATION SERVICE
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JPRS L/10662
16 July 1982
, .
JAPAN REPORT
(FOUO 42/82)
: .
U. S, - JAPAN VLSI WAR
CONTENTS ~
Japan's Strength in 64 K RAM, Anxiety Discussed.�..���������.�..�,. 1
(SHUKAN ASAHI, 1 Mar 82)...........
VLSI War Expected To Become More Fierce 9
(Tatsu Seko; TOSHI TECHO, Mar 82)�������"
NEC President Sekimoto Interviewed on VLSI War , 13
( NIKKEI BUSINESS, 22 riar 82)
Backgroundtof NonakaarNliKKEIUSANGYOSSHIMBUNeV15W20, 22, 26,
~ 19
27, 29 Mar 82)
Japanese-U.S. Semiconductor Competition, Cooperation.������...,..., 50
(DENPA SHIMBUN, 29 Mar 82)����' " '
NEC Vice President Ouchi Interviewed on Semiconductor Issue 90
(SANKEI, 30 Mar, 1, 2, 5 Apr 82)
Confronting U.S.-Japanese SemiconGYOtSHIMBUNSt16e17A22124eMar,
(Eiichi Hasegawa; NIHON KO � 100
7 Apr 82) .
.
_ 3 _ [III - ASIA - 111 FOUO]
.
.
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J[~PAN'S STRENGTH IN 64 K RAM, ANRIETY DISCUSSID
Tokyo SHUKAN ASAHI in Japanese 1 Mar 82 pp 76-80
[Text] "The American semiconductor industry has been lau~ed as the strong- .
hold of technological innovation and industrits firstssetback andtissstagger-
ttie Japanese forces, and it is experiencing
ing in its struggle for survival," according to an article in the American
economic magazine FOR'1'UNE entitled "Semiconductor Chips--RoutinJaJanahasecap- ~
Victory" (24 December 1981 issue). The article further says: P
tured 70 percent of the wc~rld's market in 64 kilobit RAM ~Rand�m JQ~anshas
memory) and has won an overwhe].ming victory. With this victory, p
probably won supremacy over the RAM market for the rest of the century.
The 64 kilobit RAM--an item only a few millimeters square made from sand
(silicon)--has entwined~thecmaflict,~and incthe backgraundJisathensituation
United States in a decisive
that this memory will be the strategic product which will herald the attain-
ment of the VLSI (very large scale integrated circuitry) age.
E'LSI usually refers to a single chip within which more than 100,000 elements
are integrated, and this degree of integration i's at leasc an order of magni-
tude greater than the 10,000 or so elements to be found incalled~the dynamic
scale integrated circuit) of th~ past- ~nca acit~is~~ rised of a transis-
P
type, each bit (a bit is a unit of inemory P Y
tor and condenser, and a 64 ke
tsi anaintegration of 150b000,elementsr Wlthis
its accessory circuits repres roduct.
in this sense that VLSI is c:alled an entry p
The reason the domestic andrf ~hei64 kilobitduRAM is becauserc?fWthenalmost un-
desperate market battle ove ointe~l out in the afore-
limited development potential of its market. As was p
mentioned FORTUNE magazine, last year's salesc(1981) stercent~oftthetoutput
about $100 million more or less, which was leG~ than 1 p
of the world's semiconductor industry.
On the other ?iand,this market is expected to increase to S2e tedito come9up~
and its fraction of the semicc;ndhat~thesekfiguresaarelrealized, this will be
to about 10 percent. Assuming t
a record for sales of any single i m~hen25cyearphisto .ry ofdthe semiconductor
it will be the best selling chip
y,,
industry" (FORTUNE magazine) is almost a foregone conclus_on.
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The semiconductor makers in Japan, the United States, and Europe which have
eyed this "treasure mountain" and have entered the field include roughly 15
companies. The principal participa:its are Motorola, Texas Instruments (TI),
Intel, and Mostec of the ilnited ~~ates, Hitachi Limited, Fu3itsu, Nippon Elec-
tric, Oki Electric Industry, and Tost?iba Corporation of Japan, and the Siemens
Company uf West German}~ f rom the European sectur; however most of these com-
panies still have not gone all out to exploit this item.
As a result, there is fierce competition between makers wherp the 64 kilobit
RAM market is concerned, and it was inevitable that a Japanese-American clash
would occur. ,
The Japanese semiconductor industry had already had a confrontation with the
N:nerican side in the matter of the 16 kilobit mpmory, which was the predeces-
sor to the 64 kilobi.t RAM, and Japan had waged a"successful battle" by cap-
turing a 40-percent share of the market. What is taking place now is said to
be the ensuing battle over VLSI.
Now, the ,,..ranese makers on the first round of this present controntatian were
able to do even better than with the 16 kilobit item, and they came very close
to achieving an "overwhelming victory" according to the results at hand.
.Japanese Forces Emphasize Investment in the 64 Kilobit Battleline
'nc~ reader is referred to the accompanying table. This table, compiled by
the Dataquest Company, an American survey company, shows the 64 kiJ.obit RAM
out.put by d~ffe~:ent makers. It can be seen that since the start of mass pro-
duction in 1979, Lhe Japanes2 makers have consistently led the field.
'The American share of the output for the third quarter of 1981 (3,495,500
units) was 33 percent and the Japanese share 67 percent; Hitachi ranked first
and Fijitsu ranked third, indicative of the Japanese strength. The United
States still has double Japan's output where the overall semicon~iuctor indus-
try is concerned, and one can readily see how the Japanese makers have gone
all out in this leading technology product.
"Certainly the Japanese forces are strong." This was the frank statemer~t of
President G. Moore of the American Intel Company when he visited Japan late
last year. The Intel ~ompany is one of the well-known companies of Silicon
\~alley (the leading semiconductor industrial belt in the worln which
~tretcties along the southwest shore of San Francisco Bay) whic:: since its
inception in 1y68 has become a microcomputer giant and "memory king." On the
~tl~er hand, its 1981 ;~ales suffered a setback to about $800 million from the
rrecedin~ year's $8~0 million because of the recession. Where the memory
business is concerned, it does not come in tr~e top five category, showing its
lack of strength in this area, and a"~ullout statement" ha~ often been made.
"Tt~e term 'pullout' is not appropriate," said President Moore emphatically.
"Intel is putting all its strength into EPROM (special memory with readout
wtiich can be changed electrically), which is another promising market in the
memory area, and that may be the reason for such rumors to be floating about.
If we look back, we see that when the world's influential semiconductor makers
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rushed into the 16 kilobit RAM market in 1977, Intel remained the only company
which ~supplied both EPROM and 16 kilobit RAM. Since that time, in order to
fulfill our responsibilities to our users, we have shifted our production sys-
tem to EPROM. We like to think that the ob3ective situation is the same right
now." ~
But when we pointed out that despite all that has been said, the American
share of the 64 kilobit RAM market is small, Moore answered: "The Japanese
makers, after producing their first 64 kilobit RAM, put all their investment
into this area, and this is the margin by which the Japanese makers are lead-
ing the American makers." He added the following, as though it were an after-
thought: "To be sure, we don't expect this situation to continue indefinitely.
The American makers are gradually building up their mass production systems,
and they should be able to recover some of the share gradually."
The American makers seem to be pia~.ning a Xecovery policy to regain their
ground in one sweep. On the other hand, the present situation is such that,
putting President Moore's thoughts aside, the lack of corresponding successes
and pullout behavior stand out.
The American semiconductor industrial leaders which had been wielding their
strength as leaders in this field, including companies such as National Semi-
conduct~r, Fairchild, Advanced Microdevices (ArID), Mostec, and Intel, which
comprise a series of technolugy-oriented firms, have done very little up to
now regarding mass production efforts in the area of inemory. There are many
reasons, and these reasons differ with the various companies, but it seems
that they have not established mass production technology and have been de-
layed in investment �in facilities because of the lack of funds.
~ While that may be s~, the ANID Company which is one of the influential busi-
nesses in the Valley declared at a top business meeting last fall that it
would get out of the 64 kilobit RAM market. President J. Sanders, loudly
lamenting the situation, sa~d: "The onslaught of the Japanese makers has
left us no room to enter," as he threw in the towel.
American Makars "In Bondage"
Among these makers, the ones which tiave assured themselves a fixed share of
~ the market are the second-ranking semiconductor maker,.Piotorola, and the top
maker, TI. On the other hand, last year TI revealed plans to switch its
Austin, Texas plant, which was just completed last year, from mass production
of 64 kilobit RAM to 16 bit microprocessors. The main supply plant for -
64 kilobit RAM which TI has at present is its Miho plant (Miho-mura, Ibaraki-
ken) in Japan.
According to FORTUNE magazine, such moves on the part of American makers
represent none other ttian "complacency with one's business." '.~]hen one delves
into the factors responsible for such a situation, it may be said that the
"strength" of J~.pan's semiconductor industry emerges as a ma~or factor.
~ake, for example, the difference in fund acquiring capability. As the semi-
conduc~or industry aspires toward development to the VLSI age, the specter of
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the i~igh cost of new facilities looms, and the price tag of 10 billion yen for
a new plant is not surprising. This is an area where the Japanese makers have
gre ater capability because they are also involved in heavy electrical equip-
ment, computers, and household electrical appliances and they are, for the
most part, giant industries.
On the other hand, the American makers (particu].arly the Silicon Valley makers)
are mostly of the venture b usiness scale and of the mediimn- or small-business
level, so funds to expand the business or renovate their facilities do not
come readily. This is why there are many cases in which a business puts it-
self into boadage to domeatic r_onglomerates or to European industries; however,
such businesses do not fully understand the semiconductor business and the tim-
ing of their investments is frequently badly misplaced.
There is also a wide difference in production technological strength. One
such example is where many of the American makers resorted to narrowing the
pattern width and decreasing ~he chip dimensions in order to maxi.mize the ninn-
ber of chips to be made from a single wafer (thin circular plate of silicon),
but this practice resulted in a lower yield (rate of acceptable products turned
out).. Lower yield leads to higher cost and detracts from competitive strength,
and this was the adverse situation they found themselves in.
In contrast, the Japanese makers place assurance of yield as a primary prem-
ise, and they allow a large margin in their circuit designs. This does not
make the size of the chip any smaller. but eases the pressure on the production
pro cess, and the net result has been increased productivity. In the midst
of the Japanese-Ameri.:an semicon3uctor friction, the American side claimed
that larger chips do not make possible lower cost and it accused the Japanese
of 'dumping,' but the actual situation is just the reverse, said Vice Presi-
dent Jungi Ouchi of Nippon Electric. Former President L. Sabin of the Mostec
Company said: "The Japanese makers, in setting out on mass production of the
64 kilobit product, considered it sufficient to expand and improve the tech-
nology used in the production of the 16 kilooit product, and that turned out
to be the proper course."
The Japanese superiority a3so stands out onthe quality front. At the "Semi-
conductor Seminar" held in Washington in March 1980, section chief R. Anderson
of Hewlett Packard, which is one of the larger users in the United States,
stated: "The Japanese memory (16 kilobit RAM) has a reject rate upon receipt
an d a damage rate in the f ield which are roughly 10 times superior to the com-
k~arable rates for American products" (the so-called Anderson bomb). He later
came out with tt~e statement that "We now find this difference cut down to a
3:1 ratio," indicative of the improved quality of the American products. On
the other hand, th~s gap has not seen much improvzment with the entry into
the 64 kilobit age, and "there is still a 2:1 difference," according to
FORTUNE magazine.
~ Industry related parties in Japan made the following statement with regard to
the reason Japan is surpassing the United States in the matter of quality.
"L~iiile there is no denying the fact that quaiity control is rigorously prac-
tic~d in the Ja~anese plants, there is also the synergistic effect of the
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industry and knowledge level of the workers who man these plants, so quality
is buflt into the products they make" (Vice President Ouchi of Nippon Elec-
tri.c) . .
"When the 'finishing precision' approaches 1 micron (1/1,000 of a millimeter),
there is a battle with dust particles, and the focus of the operation is to
render them dustfree and unmanned. This 'is an area where Japanese plants
have done well in the matter of automation and the use of clean rooms, and this
has also improved productivity" (Kazuo Kanehara, head of the Semiconductor
Department, Hitachi). '
.Tapan's strength comes from the advanced state of its lifetime employment sys-
tem and its reassessment of.tt~e group principle, but FORTUNE magazine especi-
~lly poin~ted out "Japan's organizational strength" for evaluat3.on, and this
is a point worth noting.
The magazine stated: "Where 64 kilobit class chips are concerned, establish- .
ment of long-term plans, continuous teamwork, and great improvement in con-
. trol on tlie production front have become necessary, and 'the situation in the
U.S, companies' where technologists and design people are continually shifting
between different companies, which in the past was considered essential to the
'cxossbreeding ~ffect,' has now become a tremendous burden."
Price Will Be 1/20 Within 2 Years
In a situation in which the "treasure mountain" in the form of the 64 kilobit
RAM is well in hand, while the American makers are in a state of stagnation
and the Japanese makers have ach3.eved a resounding victory, the top makers of
Japan are not relaxing their guard.
One of the reasons here is that while the Japanese have been able to lead the
Americans, there is the need to win out in the production battle with the
other domestic makers.
Among these companies the top struggle is between the two semiconductor com-
panies: number one, Nippon Electric, and mmtber two, Hitachi. Hitachi plans
to use its superiority in the memory market to overtake Nippon Electric"
(Semiconductor Department head Kanehara) as its strategy; it came out with
plans to increase production to 700,000 units per month by the end of last
year and to 1 million units by the end of March.
Then, Nippon Electric, which had been producing only 300,000 units as late as
last October, suddenly announced plans for greatly increased production, which
left Hitachi uneasy. This plan called for a monthly increase of 150,000 units
to a system capable of producing 1.05 million units by the end of March.
Where Nippon Electric was concerned, "there was a sudden increase in demand,
and we had to change our policy" (Vice President Ouchi), but Hitachi con-
sidered that "to tack on an extra 50,000 units by a later announcement is not
acting responsibly" (Hitachi top executive~).
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In addition to these_ two companies, Fujitsu laid plans for 600,000 units,
Mitsubishi and Oki for 500,000 units each, and Toshiba for 300,000 units by
tlieir production systems, and these companies plan to maintain their world-
wide rankings.
Another reason the top inakers cannot rest easy is the price battle, which has
sunk into the depths. Where a unit price of $100 was the prevailing level
about the beginning of 1980, when this item appeared on the market, it had
dropped to $30 by the end of that year and further to $15 by the end of
April 1981, to $10 by the end of September, and still further to $6 by the
end of the year. In other words, the price of this item dropped to about
1/20 of the initial price in the course of a scant 2 years. This trend is
underscored by the following statement from one of the top personnel of a
large maker: "The price is moving like a nightmare even before tha product
- itself."
_ The 256 Kilobit RAM Will Be the Strategic Battle
Lven before the 256 kilobit RAM market has become firm, plans for the produc-
~ tion of the 256 kilobit RAM with four times t1.:e capacity have taken shape,
and this is again source of a~iety. The capacity of semiconductor memory
quadrupled in 2 years over the 1970 deca3e to ;;ome to the 64 kilobit level.
A5 the VLSI age was entered, this rate of development was blunted, but even
then a doubling every 2 years is expected.
If we accept these figures, then the 256 kilobit age should be upon us in
1984, but in this world of "first in, sure victory," the theory is that if
one can be just a year ahead of the others, he can win out. This is why
- makers such as Hitachi, Nippon Electric, and Toshiba set out early in the
game to establish their production systems and hope to enter the production
phase sometime between the latter half of this year and the start o~ next year.
Tiiere is a consensus in the industry that "the 256 kilobit market will deter-
� mine the fate of the VLSI conflict," and the moves by the various companies
f rom here on will bear watching.
In the midst of such a situation, the sentiment of other countries against a
"strong Japan" may become even more severe. There are strong .feelings within
the industry that "Japan acquired a 40-percent share of the 16 kil~bit RAM
market and created trade friction. It has acquired a 70-percent share of the
64 kilobit RAM market, and if it should make a single error, there may be an
instant recurrence.
~t the present time, the SIA (~nerican semiconductor industrial group) is urg-
ing the government to establish import regulations, while the government is
~ said to be studying regulations to be applied to items of national security.
The dire premonitions experienced by those in Japan's semiconductor industry
on reading the rORTUN~ article have already proved to be true.
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Changes in Degree of LSI Integration
~y :
(1) 10~ units (7) 16 kilobit
(2) 1990-2000 (8) 4 kilobit
(3) Double in 2 years (9) Dot~ble each year
(4) 256 kilobit (1~, 256ibitit
(5) 64 kilobit ~ ~
(6) Number of elements in chip (12) Year
Output of 64 Kilobit Dynamic RAM
1981
First Second Thixd
1979 1980 4uarter quarter quarter
Hitachi Limited S 105 200 700 1,100
Motorola 10 150 125 350 725
rujitsu 24 130 110 360 550
Texas Instruments 2 24 35 130 370
Mitsubishi Electric S 17 ~6 70 320
Nippon Electric 0 5 50 100 250
Oki Clectrical Industry 0 S 5 30 100
Mos tec 0 0 S 10 4C~
Toshiba Corporation 0 7 10 20 20
Intel 0 3 5 10 20
(Source) Dataquest survey S is sample output (Unit: 1,000)
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Because of the Fierce Competition,
Each Maker Seems To Be Adopting Some Form of "Insurance" ,
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Key :
(1) United States-Japan Computer (14) Mitsubishi
Industrial System Chart (15) Oki-Univac
(2) United States (16) Japan Univac
(3) Japan (17) To end of March 1976
Toshiba (18) Hitachi
197p (19) Fu~itsu
(b) Nippon Electric HIS (20) Capital agreement
(7) Nippon Electric (21) Sales agreement
(S) 1962 (22) Technology agreement
(9) VLSI Technology Research Group (23) Includes small computers, peri-
March 1976 pheral equipment, production
(10) Joint research laboratory companies, or sales companies
(11) A Group Laboratory (24) From JECC Notes
(12) B Group Laboratory
(13) (Fujitsu-Hitachi-Mitsubishi)
(Nippon Electric-Toshiba)
COPYRIGHT: Asahi Shimbunsha 1982
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VLSI WAR EXPECTED TO BECOME MORE FIERCE
Tokyo TOSHI TECHO in Japanese Mar 82 pp 34-36 .
[Article by analyst Tatsu Seko]
[Text] The semiconductor industry joined the ranks of 1-trill~on yen indus-
tries in 1981. When compared with the production total of 540 billion yen in
1978, this represents a sharp growth ~f almost double in the course of 3
years., With the accelerating tr.end of the industrial world in adopting the
electronics revolution, growth is expected to continue at the rate of 20 per-
cent or better each year, and the semiconductor is tabbed as the top growth
item for the eighties.
Furthermore, the semiconductor technology as represented by ti'LSI (very large
scale integrated circuit) is the backbone of the electronics industry, and its
strategic importance is increasing by the year. This is why the various com-
panies in this industry are fighting to out produce each other and are putting
forth every effort for technological development and investment in facilities
as they prepare for all-out war.
This VLSI war is taking place with great vigor everywhere, and a report on
this situation is presented here.
The Semiconductor Industry Is a"First In, Sure Victory" Situation
The IC (integrated circuit) invented by Kilbey of the United States in 1958
possessed only a few elements in its degree of integration. Next, Fairchild
of the United States developed the planar technology by which a number of
elenents were fo~med on a sili.con base plate; this was the event which trig-
gered development of double the degree of integration each year, and it was
not long before a degree of integration of more than 100,000 elements on a
chip a few millimeters square was developed, and the age of VLSI was entered.
The item which opened the curtains for the entry of the VLSI age was the 64
kilobit RAM (write in and read out memory). The degree of integration of a
64 kilobit RAM is roughly 150,000. At present, the prevtous generation
16 kilobit RAM is still the mainstream of domestic and foreign memory markets,
but recently there have been moves by the large American computer makers to
install 64 kilobit RAM, while there is a trend in Japan to exploit the wave
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of interest in OA (office automation) to put these units into personal coin-
puters, as a result of which the market has been expanding sharply. The be-
lirf is growing t~1at the 64 kilobit RAM will tak~ wer the main role in ttie
_ memory market by the latter half of this year.
The semiconductar industry since its inception has followed the basic business
"first in, sure victory" concept. One of the reasons Japan's IC industry was
far behind that of the United States up through the first half of *_he 1970's
was, if one looks very closely, the iact that it came in late and was the
loser. P'or a wtiile, the royalties the Japanese semiconductor makers paid to
American industries for the basic patent on the IC of Kilbey, the planar
patent, the selective diff usion patent, and other patents amounted to more
than 10 percent of the sales volume. This sinn alone made the price of the
American product cheaper,and there was a large import volume while domestic ,
technology had difficulty in developing.
~l�
But the establishment of MOS (metal oxide membrane semiconductor) technology
and desk calculators became the starting point for the rapid expansion of the
private industrial market, and the gap between Japan and the United States was
reduced at a sharp pitch. The present situation is that Japan has surpassed
the United States in some areas, but the agony of coming late into the field
is one every semiconductor maker has experienced.
- Lven the mass production war presently developing within the country on the
64 kilobit RAM shows this line of thinking on the part of all the companies
as they try to grab prior advantage. If one is late in entering the field,
he will find all the large users completely sewed up, and he will be in the
very bad situation of being unable to finance the next round of investment
in facilities if there should be an easing in the market situation.
Let us look back at the intensity of the increased production battle. Hitachi
- Limited was the first to set up a system to produce 1 million 64 kilobit
RAri's per month. This was achieved on 26 October 1981. When this news hit
the headlines, it was not more than a week before Nippon Electric, which was
the tip in the industry, succeeded in producing 1 million units per month, on
2 November of the same year. Then as the year closed and the new year was
ushered in, Fujitsu also disclosed that it was producing 1 million units per
month, and these three com~:anies were each producing 1 million units per month
as of the end of March.
nt the same time, Mitsubishi Electric and Oki Electric were stimulated by the
~lctions of t}ie aforementioned three companies and modified their initial plans
to produce 30U,G00 units by the end of March to aim at production of 500,000
units per month. Since then, Mitsubishi has decided to increase its production
- also to the 1 million units per month level by October of this year, but every
company keeps its plans f or increased production under cover, and the end of
this mass production battle certainly is not in sight.
7'liis mass production battle is not limited to the memory area. There is also
increased production conf lict in the micon area, which seems to be expanding
witti a limitless f ield of application. When a micon is coupled to a sensor
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(detection element), the combination can greatly pr~mote the conversion to
electronics of household electrical appliances, au~amobiles, robots, various
types of inedical equipment, and the co~tunications and information areas.

~ This is an area in which Matsushita Electronic Industrial, Tokyo Sanyo Elec-
tric, and Sharp, which are sem~.conductor makers for household electrical
~ systems, are expected to play leading roles.
Other electronic items which are also basking in the limelight are CCD (charge
coupled element), sound synthesis LSI, and semiconductor lasers, on which the
different companies are placing their strength as future strategic products.
In this manner, the battlelines for the VLSI age are spreading laterally
through product diversification.
Companies which shifted f rom production only for their own use to production
for external sales such as Leco, Suwa Seikosha, Nippon Gakki Company, and Nip-
pon Denso, which had been dealing in items other than electrical equipment,
tiave found opportunities to become intermediaries in IC production and have
seized the chance for spectacular development in a leading industry, and the
VLSI age has taken on the atmosphere of rivalry between local barons.
Will a 1 Megabit Make Its Appearance in 1985?
~ Part of the fate of being in a f irst in, sure victory industry is to be en-
meshed in a fierce technological innovation wave. The race to improve the
degree of integration is such a situation. Even while mass production of the
64 kilobit RAM was being put into practice, the semicondr~ctor industry was
already engaged in laboratory testing of the next generation 2S6 kilobit item
and making plans to come out with coimnercial production. Hitachi Li.mited,
if it can put everything together, plans to make sample shipments this fall
and shift into real production next spring, while Toshi:ba Corporation, which
was delayed in its entry into the 64 kilobit RAM field, is making plans not
to fall behind in the 256 kilobit race and is planning to produce this item
next year. .At the same time, Nippon Electric has invested 27 billion yen in
the construction of a new VLSI production plant at its Sagamigahara site
which is expected to start operation in 1983, and the other companies in this
industry are all planning quick entry into production of the 256 lcilobit RAM.
"While continually engaging in this fierce competition, is it safe? When do
the semiconductor makers hope to recoup their investments?" It is not sur-
prising for such statements to come from the heads of other businesses.
It is definite that the Japanese forces have prevailed and the American makers
have been bested where the 64 kilobit RAM is concerned. The share (percent of
the market) which the Japanese makers have captured for this particular item
is about 70 percent. This situation is verified by the f act that many Ameri-
can semiconductor makers have suspended production of 64 kilobit RAM or cut
down on the production and thereby backed away from confrontation with the
Japanese makers. Only two companies, Motorola and Texas Instruments, are
left in the field. It is pushing the point to judge future trends based on
. just the 64 kilobit RAM situation, but it seems definite that the American
makers are facing some difficulties in getting into the 256 kilobit RAM race.
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1.n CI?e m~tter of de~;rec of integration, Japan's semiconductor maker5 I~avc~
:ilrcady I~egun laboralory research on the 1 megabit RAM. 'lhe 256 kilobit W1M
represents a degree of integration of roughly 600,000 elements. Simple cal-
culation shows that a 1 megabit RAM will have a degree of integration close
to 2 million elements. It is possible that this product will appear by 1985
at the earliest, and some of the American makers are already voicing senti-
ments of "giving up."
In another direction, the legal period of amortization for semiconductor pro-
duction facilities is 5 years, reflecting the fierceness of technological in-
novations. On the other hand, nobody waits that long. This is manifested
by the situation that "the semiconductor area must recover its investment
completely in 3 years and produce a profit," which is a view shared by top
business management. This viewpoint f urther spurs the increased production
conflict aimed at large-scale profit. Once one becomes enmeshed in the back-
bone technology of electronifi.cation, one cannot relax or backtrack.
In addition, research and development and investment in facllities for VLSI
eat up ~igantic sums of money. According to some test calculations by a well-
known semiconductor consultant in the United States, the cosc of constructing
a VLSI level plant will increase from $23 million in 1980 to roughly double,
or about $50 million in 1985. Already semiconductor industry top maker Nippon
Electric spends more than 10 percent of its total sales on plant investment,
and tt~e other companies are assigning the major part of their investments to
- the semiconductor area.
In order to survive in this VLSI war, high technological development strength
and a strong sales force are required, in addition to abundant fiscal strength.
'Che fact that all of these companies have put considerable effort into the
~zcquisition of funds attests to the situation that this is an important sec-
tor in the overall battle.
Tmprovement in the degree of integration other than in the memory area, the
ui~i5s production conflict, and the diversification of products to respond to
t}~e rapid electronif ication in the industrial world present a vast number of
~rob.l.ems which the semiconductor maker must resolve. The food f or new indus-
~ries and the real conflict in IC is just beginning.
COPYRIGHT: Asahi Shimbunsha 1982
_ 9923
CSO: 8129/1084-B
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NEC PRESIDENT SEKIMOTO INTERVIEWED ON VLSI WAR
Tokyo NIKKEI BUSINESS in Japanese 22 Mar 82 PP 26-2$
[Interview with Tadahiro Sekimoto, president of Nippon Electric Company, by
Ryoki Sugita of NIKKEI BUSINESS; date and place not specified]
[Text] Japan, which had been the student, is now threaten-
ing to t,ake over the professional seats of the leading
countries of the Western world." This is the factor re-
sponsible for the emotional reaction of the Western coun-
tries, according to President Tadhiro Sekimoto of Nippon
Electric, which is in the forefront of this high-level
technological friction. He further said that there will
be "self-propelled technology" from here on, as he put the
spurs to development of independent technology and pro-
claimed that "We would like to get rid of the criticism
that we just join the bandwagon of technology." "A
researcher must himself hammer out his standards and make
his challenges," he said in expounding his offensive
technological business theory.
There Is a Belief That the U,.S. Government Is Inciting the Industry in the
Second Semiconductor Conflict
Question: It seems that it is your thesis that Nippon Electric, which has
developed the so-called "C and C" technology which ties together computers
and co~unication, is in a very enviable position to cater to society's needs
from here on. ~You actually are directing an aggressive business, but is it
not also the situation that because you represent the main force of a high-
level technology, you are continually exposed at the front lines of the
Japanese-American business friction? I would like to ask you, first of all,
just how you regard the present commercial friction, going back to the ex-
perience of the initial "Japanese-American semiconductor war" and thereafter.
Answer: Focusing on semiconductors, at the time the first se.miconductor war
occurred in 1977, the U.S. Government made the following statement, despite the
efforts on the part of industry: "From the standpoint of free trade, it be-
hooves you to build up your competitive strength." On the other hand, when
this second semiconductor war emerged, I received the impression that it is
the gover~ent which may be inciting the industry. This is a feature which
is completely different from the first.
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' HOR OFNIC[AL USF. ONI.Y
The fact that the safety assurance problem has been included in the discussions
is also a new point. Despite these tough times, the United States is putting
up ~noney for the defense of the free countries, but it says that Japan's de-
fense load is too small and that this situation needs to be resolved. Z once
said that this was a problem of ~ealousy. To be sure, this trade friction is
not simply one of economic fundamentals; this is the view I have taken and it
is gradually beco~ing more enhanced.
As trade friction develops over a wide front, as is occurring today, it is no
longer a problem for a single industry or a single business. It must be
handled as a problem of all industry or a national problem, and if we limit
ourselves to IC (integrated circuits) to argue over the situation on a narrow
front, the solution will not be forthcoming in my opinion.
Tl~e Reason U.S. Products Do Not Sell in J~pan Is the Lack of Sales Know-how
(2uestion: ~ven if one might say that the U.S. Government is not inciting the
industrial world, it is true that the government approve~ the hard stand the
industrial world is taking against Japa:z. Up through last year, the attitude
' within the Reagan administration was: We should learn from Japan. This
situat~on has now changed. Can we say that this was the result of a careful
study of Japanese business, f rom which it was discovered that it could not be
readily duplicated?
Answer: President Reagan has not departed from his stand on the free trade
principle, but he has been saying that there must be a better balance in trade
and the red ink on the American ledger needs to be reduced so that the admin-
istration can breathe easier. Let us look at a problem which is separate from
the introduction of Japanese business practices and that is the subject of QC
(quality control); there are efforts on the part of American industry to in-
crease this program. The Americans have only started their efforts, and it
has not reached the stage where voices are being raised to the effect that
they cannot compete with Japanese business. First of all, there is no beaten
dog aspect in their makeup.
Ttiey are wondering why, in spite of their high-level technology, they cannot
sell to Japan? Could it not be the nonduty barriers? Certainly, there is
wonderful technology in the United States. If we were asked to duplicate the
tc~chnology that enabled the United States to launch the Saturn exploration ob-
servation ship Voyager, we would be unable to do so.
Now, just the possession of high-level technology does not allow one to engage
i.n business. Besides good technology and a good product, sales knowledge or,
in other words, sales know-how must be at hand or good business is not possi-
ble. The reason the share of American products on the Japanese market is low
i5 not just one of superinr or inferior technology but the great lack of sales
know-how. It is 20 years since Nippon Electric established its NEC-America in
1963, but we were active in the United States even before then. It is through
the selling experience we accumulated that we have come to today's position.
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That is why even when the Japanese market is opened up exactly the way the
Nnericans want, there will be no avalanche in sales of American products.
Tliis is an area in which there is "misunderstanding" either intentional or in
good faith.
The F'roblem Is "Engulf ing Friction"; It Will be Structurally Unfavorable to
Electronic Products
Question: Electronics related activities involve high-level technology pro-
ducts, and a competitor is necessarily sub3ected to extreme nervous strain.
When 3apan is pressing along a technological front, if a misunderstanding is
left untended, could the situation be amplified emotionally and eventually
wind up a major problem?
Answer: The present co~nercial friction is not a"forcing friction" but an
"engulfing friction." In another direction, even though we do not use force,
the other side is buying Japanese products at a good clip and is, in fact, en-
gulfing our products. Since the need for electronics is on a single path to
expansion, the goods that we handle will probably continue to be swallowed up.
That is why it may be said that this fric.tion ~rill not become a structural
affair. I believe that friction is an adjunct to hwnan society. On the other
hand, I do not believe that unnecessary anxieties should be left untended to
start unwanted friction.
The problem Japan presently faces with IC is the 64 kilobit RAM, which is the
gateway to VLSI, and the fact that we have acquired 70-80 percent of the share
in the American mark~t. On the other hand, if we compare the situation to a
marathon, we are still only 100 to 200 meters from the start, and the Japan-
ese industries, which have been embroiled in their own domestic competition,
came out of the starting gate as though in a dash. It is not because Japan
is so technologically superior that it is ahead at the present time.
- Looking at the 1981 IC trade with the United States, the excess of exports
over imports is only on the order of 700 million yen. The exports also in-
clude some products which American companies produce in their Japanese subsi-
diary plants. This is why the problem which is being regarded with such
anxiety is something which the Americans should understand if explained
properly.
'This is why this compa:,:~ has set up a subsidiary plant for production in the
United States: to ju~ip into the rival co~nunity, become part of it and main- -
tain a conversant stance. On the other hand, as was mentioned before, this
is a problem between countries, and there is a limit to such measures.
Japan Which Had Been the Student Is Now the Instructor, and This Must Be a
Source of Irritation to the Western Countries
Question: When we look at the true source of American irritation, the fact
that Japan had been getting a f ree ride on the technology train may be a fac-
tor. According to foreign comments, Japan is lacking in creative ability and
depends on foreign efficiency application end. What do you, the international
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satellite communi~ations company, think about the research and development
system of both Japan and the United States and how do you react to such
criticism?
Answer: The st~tement that Japan is relatively lacking in innovative work
possibily was true in the past. Even in the electronics area, our efforts to
date have been concentrated on catching up with and overtaking the United
States. -
We can now say that while we have not overtaken the United States, we have
risen to a level that rivals the United States. To say that we had a free
ride till then is somewhat ~udicrous, but if the Americans believe "we have
been copied a lot," this is something we cannot deny.
In the past, the Western countries were the professors and we were students.
The students are now in the assistant professor class who occasionally write
papers and threaten to take over the professional rank. This situation has
led the other side to have mixed feelings and to think that it would not have
been teaching if it had known this was to be the result. I think that from
here on, Japanese research and development should pursue the creative and
more intensively so we can say that we are not just �reeloading by the time
the 21st century rolls around.
Shouldn't We Study a Matrix Organization Which Exploits Individual Creative
Ability?
Question: If we keep the Comsat experience in mind, what are the areas of
American knowledge which we should emulate in setting up our future research
and development system? ~
Answer: Vertical and horizontal control matrix type work promotion is under
study in the United States, and it is now thought that creative work is not
possible without such a setup. The usual organization consists of a verti-
_ cal functional organization split according to different specialties and a
horizontal type project organization in which the necessary specialists from
the necessary functional organizations are assembled. An example of a large-
scale project organization is the Apollo pro3ect organization in which work
is performed very efficiently under a single head. On the other hand, if the
capabilities of the man heading a special area are wanting, the whole system
will suffer.
If there are an abundance of researchers above a fixed level, the project or-
ganization will be good, but the actual situation is that ~uch a situation is
~cldom realized. This is where the matrix organization concept emerges.
In the COMSAT project, I placed the various researchers under different func-
tional organizations into a nwnber of projects, and a total force of 20-30
people were engaged in parallel participation in five proj ects. In this
system, I did not assign only a single manager per project, but I also
assigned an "alternate." The head of project section A handled not only his
project but also served as deputy manager for the sections in which his
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p~oplc were involved. It became possible tomake an individual evaluatlon of
every researcher in this manner. The matrix organization is also a system
which improves the capability for exploiting the individual's creative ability.
Question: That is to say, when a party working in the organization partici~-
~ pates in rese~rch and development, the ability to correctly evaluate a give~l
party is one of the keys in drawing out his creative talent?
Answer: In a leading area where individual brain power is relied on to come
up with ideas, unless individual evaluation is given greater weight, it will
probably be difficult to draw forth creative ideas.
Questio~i: In the area of technological development there is usually the
question of whether the need (demand) intent or the seed (seed) intent should
prevail. What do you think the future direction will be?
Answer: We are engaged in research and development as a business, and unless
the final product we come out with is accepted by society, our work will be
meaningless. That is why it is very important to know just what is needed in
the market, and this is where the statement "Listen to the market with regard
to new technology" applies.
And that is not all. I also use the term "technology runs by itself." That
is to say, this is the "seed" approach, and this is something which comes
closer to a pure research effort of a scientific nature. On the other hand,
a general type of research and development can give rise to something en-
tirely new for which there seems to be no application. At the same time,
research can take place completely independent of market trends, and the
research can run by itself, as the words imply. This is where one creates
a market for the creation.
- If we are to pursue creativity, then we tend to go toward the seed concept,
and just how many seeds we come up with in the future to contrib ute to inter-
national society is going to be a major subject.
Jump at Chances; Uncertainty Is To Be Expected, Anticipate Takeover ~
Question: What are the researchers doing at the present time?
Answer: A researcher must himself keep a rein on himself. That is to say,
he must establish a goal, set up his own timetable, and conduct his work in-
dependently. Whether one goes at this work with full force marks the divid-
ino line of a~ood researcher.
. While not limited to researchers, mankind has nodes at frequent intervals
just as a bamboo rod. This is chance, and one does not know which direction
to proceed with this node as the boundary. The greater the chance, the lar-
ger is this node, and the more difficult the f uture is to see. The situation
when I was asked to join COMSAT was such a case, and I was �ull of uneasi-
ness. What had once been a straight path in the past was now being criss-
crossed by intersecting paths.
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A cliancc is something like that, and one ~umps at it. Uneasiness is to bc ex-
pected. It is the ability to suppress this anxiety and seize the opportunity
that is desirable.
Question: I am asking for a very positive opinion, b~it please define the
future dream for technology.
Answer: Information will be tr~ated not only by conversation but by sight
and exchange of data, in other words, by creating a C and C system. Not on~y
electronics but other compound tec'tinologies such as biotechnology wil~ be
exploited to develop C and C, giant "artificial servants." The hands and f eet
will extend to the ends of the earth, and the brains will be vested in the com-
puter. On the other hand, it will eventually be man who operates this system
in the "artificial servant" that will be developed, and this is the dream by
which I hope we can c~ntribute to society's well-being.
[Interviewer] These are the impressions from Mr Sekimoto, who gives you 10
answers to each question you ask. He is a man whose mind works very fast,
and he presented himself as a polemicist of the top c~ass where research and
development was concerned. In addition, he was well versed in theory of life.
The statement "suppress the anxiety and seize the opportunity" has deep mean-
ing. It is only when one throws his whole effort into his assigned work,
wl~ettier technological or administrative, that new paths are opened to man-
kind; this seems to be his iran rule for salaried people. Combu~tible man--
this is not for the business but eventually for himself.
Tadahiro Sekimoto
He was born 14 November 1926 in Kobe, and is now 55 years old. He graduated
from the Faculty of Science of Tokyo University as a physics major in 1948 ~
and went to work for Nippon Electric. He was engaged in research and develop-
ment at the Central Laboratory until May 1969. During the interval betw.:en
Au~ust 1965 and August 1967 he went to the international satellite communica-
tions.company COMSAT in the United States, where he directed research on the
PCM satellite communications system as research department head. In November
1974 he was elevated to a director, in June 1977 to executive managing direc-
tor, and in June 1978 to senior executive managing director where he was in
ct~arge of domestic sales. He replaced former Pre~ident Tadao Tanaka (pres-
ently director and consultant) as president in June 1980.
COPY RIGHT: Nikkei-McGraw-Hill, Inc 1982
9923
cso: 8129/1084-c
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BACKGROUND OF VLSI WAR WITH LINITED STATES REVIEWED
Tokyo NIIQCEI SANGYO SHII~BUN in Japanese 15-20, 22, 26, 27, 29 Mar 82
[Article by reporter Kato] ~
[15 Mar 82 p S]
[Text] The Japanese-American semiconductor friction has been reignited. The
American side has its sights on setting up anti-Japanese regulations to squeeze
- dawn on VLSI (very large scale integrated circuits). The most advanced
Japanese semiconductors and technological development system liave become ob-
jects of criticism. The Japanese and Americans are about to engage in a life
or death struggle. The factors responsible for this Japanese-American semi-
conductor friction and the Japanese response are sought in this article.
SIA Is Lighting the Fires
1 February 1982. The top executives of SIA (American Semiconductor Industry
Association), which is made up of 14 leading semiconductor makers of the
United States, secretly made a visit to Deputy Representative MacDonald of
the Office of the USTR (United States Trade Representative). The SIA dis-
closed to the USTR the situation with regard to the 64 kilobit RAM (random
write in and read out memory), which is the top batter in the VLSI lineup, in
which roughly a 70 percent share (fraction of market) o� the American market
for this item has been captured by the Japanese, and stated that "If this
situation remains unchanged, the American market will be taken over by the
Japanese," as it strongly urged "government aid to improve" the situation.
This is the beacon signalling the rekindling of Japanese-American semiconduc-
tor f riction.
This was the opener initiating anti-Japanese criticism spearheaded by American
semiconductor makers and accompanied by high government officials and mass
- communication media. There are still accusations on the part of American in-
dustries of Japanese dwaping and cries for investigation, and many fires are
being started all around which may not be extinguishable even with large
fire trucks.
The concerned people in Japan were shocked by this recurrence of friction.
Vice President Jungi Ouchi of Nippon Electric, who serves as spokesman for the
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1~()R (11~1~1('IA1. I1tiN: ()NI.Y
Japanese semiconductor industry, made the following unhappy statement: "We
have done nothing wrong."
The Japanese cannot be faulted for the dile~a. This is because the IC (inte-
grated circuit) duty problem, which had been a thorny issue since the first
semiconductor friction starting in 1977, had 3ust been resolved. This issue
came to the forefront during the Japanese-American su~it meeting in May last
year between Prime Minister Suzuki and President Reagan, and there was joint
agreement to lower the duties. The United States lowered its duty to 4.2 per-
cent starting in January of this year (it was formerly 5.6 percent), while
.lapan lowered its duty to 4.2 percent (formerly 10.1 percent) in April of this
year, and although there was some discrepancy in time, the final rates became
thc same.
The trends in IC exports to the American market, which are carefully monitored
each month by responsible people on the Japanese side, were "good" throughout
last year. The cwnulative exports for the January-December trade registered
a decrease of 1.7 percent from the previous year, to 71.2 billion yen, while
imports increased by 1.3 percent, to 70.5 billion yen, and the net balance
was a plus 700 million yen (compared to 2.8 billion yen for 1980).
Compared to the 1970's, when Japan's balance of trade was consistently nega-
tive, there is a change in the situation, but the balance of trade where
Japanese IC is concerned is at equilibrium. "The Americans have nothing to
pick on even where export-import balance is concerned" is the Japanese co~nent.
Exports to the United States have leveled out at about 30 percent of total
exports, and concentrated exports to the United States such as those of auto-
mobiles are not seen in the IC area.
At the same time, mutual exchange is advancing between the large semiconductor
makers of the two countries, and not only sales centers but also production
plants are being started on both sides. The disclosure of VLSI related patents
was settled 4 years ago, and closed licenses are popular between the Japanese
and American makers. It is not strange to hear statements such as "The semi-
conductor makers of these two countries are in a mutually supplementary rela-
tionship" (Japanese Electronic Macl~ine Industrial Association).
64 K RAM Is Initial Point of Conflict
Lven regarding the 64 kilobit RAM, which has become the main focal point in
~his friction and in which Japan has captured a 70 percent share of the Amer-
ican market, the Japanese say: "The fight over the 64 kilobit RAM has just
begun. Compared to a marathon, only the f irst 200-300 meters'have been run
so far. It is not yet time to be arguing about one's share of the market,
and there is no telling what will happen to the Japanese share once the mass
production system of the American makers gets rolling" (according to Managing
I)irector Toshio Takai of Japan Electronic Machine Industrial Association).
On tl~e other hand, the actual situation is that such statements on the part of
tlic .lapanese are essentially unheeded. Semiconductors are associated with
ditferent backgrounds ar:d factors compared to the fibers, steel, and automo-
Uiles which were the friction-creating items of the past, and the outstanding
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feature of this present situation is that the anti-Japanese regulations came
into the picture so quickly.
The industries ~.:hich created fxiction previously were all well-estabZished
industries. There is an altogether different picture where semiconductors
are concerned. At the time of the first friction in 1977, Japan's export of
IC to the Unit~d States was only 1.3 billion yen. The Japanese production
was only 208.5 billion yen. In 1981 Japanese exports to the United Sta~es
exceeded 70 billion yen while production exceeded 1 trillion yen (including
all semiconductors), and the real growth started here. It has been predicted
that the developments in electronics innovation will create a market in the
1990's which will be four-five times that of the present.
This is why the first friction was compared to "an adult picking on an ele-
mentary or middle school child" (industry top executive). It may be said
that Japan has taken the lead over the United States where the 64 kilobit RAM--
the present sore point--is concerned, but many c,f the areas such as micons and
logic (logic circuits) are areas of American superiority which are in no
danger.
Control Leading Industries
There is no doubt that the reason the American side is presently trying to
curb Japan is because semiconductors have strategic value. In Japan, semi-
conductors are used in all types of household electrical equipment, various
private industrial items, NC (numerical control) machinery, medical equipment,
automobiles, and robots, and the field of applicatian is broadening each year.
Semiconductors are taking the role of a heart to promote the development of
new products and differentiation of product~. In the United States, there is
great awareness of the semiconductor's role in improving performance in the
areas of space, aircraft, computers, and communications-type leading technol-
osy�
There are also strong feelings that if the present situation is allowed to
remain unchecked, there will be successive erosions of the American side.
This is why the Americans are waging a fierce war, even throwing in some emo-
tional overtones.
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- NUR ONMI('IAI. IJSH: UNI.Y
12
~1 B*
~2 ~ e
~ ~ x
- ~3~ ~
I C~~t~11~~3
~ � ~o
35
. %
~ ,~.5 ~ ~
~
~
100
P9 Q
1977~ 78 79 80 81 81
Japanese-American IC Duties
I:ev :
(1) Japan (S) Exports
� (2) United States (6) Import
(3) Trend in IC Exports-Imports (7) 100 million yen
with the United States (8) Year
(4) American export dependence
[16Mar82p5]
[Article by reporter ~iCato]
[Text] The top micon maker, Intel of the United States, released its annual
statement for 1981 at the end o.f January this year, just before the
Japanese-American ~emiconductor friction recurrence emerged. The company
reported a decrease in zales of 7.7 percent below the previous year's
788.7 million, and net profits of 27.4 million yen, which also was a 7.17
percent decrease.
Intel is the company which was the first in the world to develop the micon,
in 1971. Riding on the micon boom which followed, it increased its sales by �
an astonishing rate of 95 percent per year over the 5-year period 1971-76,
essentially doubling its sales eac}i year. This annual increase in sales was
blunted to 39 percent per year for the 5 years 1976-80, but it had already
come to be known as a success story in the annals not only of the American
semiconductor industry but the entire industry as well.
I never thought that Intel would experience so much business instability
and drop toward the red; said the head of a certain large Japanese semicon-
ductor maker.
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The SIA (American Semiconductur Industry Association), which is the stronghold
of this anti-Japan re$ulation movement, is a group which was formed in March
1977 with five companies--Intel, Fairchild, National Semiconductor (NS),
Motorola, and Advanced Micro Devices (ArID)--as the nucless. Even taday cadres
of these companies man the main posts of SIA.
Is NS Falling Into the Red?
The financial reports announced by the various companies following Intel's
disclosure were also on the dark cide. In addition to Motorola, which suf-
fered a 6.0-percent decrease in profits in 1981 compared to the previous year,
AI~ (9 months statement) showed a 70.3-percent decrease f rom the same period
last year, and NS (28-week statement) reported a decrease of 95.7 percen.t and
barely preserved its black ink status. It is being said that ~NS will not be
able to avoid falling into the red in its 34th half-year period. Fairchild
was acquired by the Schlumberger Company of France in 1979, and no company
statement was forthcoming, although it is estimated that it had suffered a
con .idarable loss in profits.
In t. _ United States, a businessman's capabilities are severely questioned on
the t,~sis of a single year's performance. Recently, Mostec, a large maker in
the memory (memory element) area, held an emergency board of directors meeting
in February, at which time the business capabilities of President C. Vin Prosso
were questioned and he was replaced. In 1977 this company was able to grab a
38.3-percent share of the market (fraction of market sales) in 16 kilobit RAM
(successive write in and read out memory), which is the generation preceding
the 64 kilobit RAM, and was way ahead of second-place Intel with 28.2 percent
and Nippon Electric with 15.6 percent and was even called the "memory king"
in the United States.
The principal factors responsible for the large decrease in profits of the
American semiconductor makers in the United States were the high interest
rates, which resulted in a depressed situation and poor market conditions, so
they picked a scapegoat (sacrificial lamb) and stepped up their anti-Japanese
attack, which is manifested in the present recurrence of friction it seems.
20 Percent of Sales to Research
With the entry into the VLSI (very large scale integrated circuit) age,
there have been sharp increases in research and development costs and invest-
ments in facilities, and this has proved to be another source of irritation on
the part of American semiconductor makers. The standard construction costs
for a VLSI mass production plant are said to be about 15 billion yen, which
represents a large increase over the IC (integrated circuit) and LSI age
plants which were in the 5-10 billion yen range. The new meoa (1 million) bit
VT.SI plant which Toshiba Corporation is soon going to start constructing is
expected to cost 20 billion yen just for the research and development building.
In addition, research and development costs to upgrade capabilities and devel-
op the next-generation products are usually allotted the vast sum of 10-20
percent of total sales. In 3apan, during the past few years many industries
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F(iR ONNi('IAI. tISM: (1NI.Y
other than electronics industries have entered the electronics field, hoping
that they have not been left too far behind, and have also joined in the IC
contest, but at tt~e present time, these entries have been limited to the top
memberti of the r~spective industry, such as the pioneer in the audio industry
and automobile parts maker Nippon Denso, the watchmaking industry's Seiko
group, and the pharmaceutical industry's Nippon Yakki. These companies are
entering this field because they can afford the vast investment required.
Japanese Companies Can Handle Large Loads
In this respect, there is a wide gulf between the American semiconductor
makers, which are large in number but represent small specialty businesses,
and the Japanese semiconductor makers, which are large integrated electrical
makers, possess a large internal market within their own company and can assume
risks (danger) much greater than the American companies.
Assigning a value of 100 to the total sales of Hitachi, Intel's sales come up
to only 8.5, while the investments in facilities between the two companies are
in 43:2 ratio and the research and development costs in 22:3 ratio (these
fi~ures for Hitachi are the estimated values for 1981; Intel's figures are
tt~ose reported for 1981). This situation reflects the desperate efforts not
to fall behind in the VLSI race. In the midst of this VLSI age entry, the
foreign and domestic semicozductor industries are seeing demand for capital
increasing, and the construction of facilities is becoming a large industry.
'['he realization that because of differences in the scale of business and the
indu~trial structure the open water between .Japan and the United States is
widening is thought to be the factor that is spurring this recurrence of
triction.
0 50 100
1 ~ ? t 11.300
(~~1% 1.81e~>"rn a~ Key:
t.3ro (1) Total sales (100 million yen)
(-~~:ti".W: 93 . (2) Intel Hitachi
~ (3) Gross profit (100 million yen)
~ ~t )c~w; s~
,~r~ ~Q.53; (4) Net profit (100 million yen)
J'"~+~ (S) Capital invested (100 million yen)
I. e.e~o ~ (6) pr,~n capital (100 million yen)
4_l,j~~~,1~ ?5 ~ (7) Fraction supplied by own capital
~ ; ~~s.~ (percent)
~,:'~':~a i.~x (8) Research and development costs
' :s~
~ (100 million yen)
~;~w a70 (9) Investment in facilities
(c~; i~~o~ ~ r.~^~,:r.+; ~ hib 731i9 c~!R (100 million yen)
~ ' 1 . . ~ ' ~ i 1 I.t $ : A !r ~ r :'v! ~ ~
(:omparison of Principal Business ~10) (Note) Comparison made witli Hitachi
assigned a value of 1.00.
Scales Between Hitachi and Intel
$1 = 230 yen. (1980 estimates for
Hitachi, 1981 reported for Intel)
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.
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1981 Performance of Major American Semiconductor Make.~s
(Unit: 1 million dollars, percent. Q: minus~
Growth Increase
Over Over
Previous Previous
Name of company Total Sales Year Net profit Year
Texas Instruments 4,206.0(4,074.7) 3.2 108.5(212.2) ~48.9
Motorola 3,335.9(3,086.4) 8.1 175.0(186.1) ~ 6.0
Intel 7a8.7( 854.6) Q7.7 27.4( 96.7) ~71.7
Analob Devices 156.2( 135.7) 15.1 4.6( 9.3) ~50.5
American Micro Systems 140.7( 129.4) 8.7 7.9( 4.3) 83.7
Advanced Micro Devices 206.4( 229.1) ~9.9 5.8( 19.5) ~70.3
National Semiconductor 580.5( 593.0} ~2.1 1.3( 30.2) ~95.7
Perkin Elmer 251.0( 252.1) A0.4 14.2( 16.4) 013.4
Note: The values in are previous year's (same period) values. This
period is 9 months for Advanced Micro Devices, 28 weeks for National
Semiconductor, and 3 months for Perkin Elmer. All other companies are
on an annual basis. Perkin Elmer is a maker of facilities to produce
semiconductors.
[17 Mar 82 p 5]
[Article by reporter Nonaka]
[Text] "The challenge f rom Japan regarding the silicon chip" has been the
wedge to rekindle the Japanese-American semiconductor w.ar and even to esca-
late it as the VLSI era is entered (FORTUNE magazine of 23 March 1981). On
the other hands the greatest challenge to the semiconductor malcers of Silicon
Valley over the past several years has come from the ma~ors (international oil
capital) and the giant conglomerate industries. These companies have highly
evaluated the future potential of IC and LSI makers with high-level technologi-
cal strength and are using their abundant capital to launch a buying attack.
Seen as Forward Looking Moves
As shown in the accampanying table, the rate of purchase o� American semi-
conductor companies increased sharply as the seventies was entered. Among the
industries interested in buying are Exxon and Schlimnberger of France, which is
a major figure in oil exploration, and General Electric (GE) and Phillips
which are integrated electric equipment wakers of the United States and
Europe. General Electric has the special distinction of having retreated
from the semiconductor business 8 years ago, but it has ideas of making a
comeback and is said to be thinking of acquiring a leading company, Intersil.
Ttiis type of industry acquisition differs from what takes place in Japan. It
is only because the semiconductor, which is the prime force behind the elec-
~ronics revolution, assures a future as a growth industry that giant indus-
tries rush in to try to buy them, while, on the othe�r hand, the semiconductor
makers are eyeing the assurance of capital which they seek by a11-out
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NOR ()NFI('IA1, l1SM: ONI..Y
participation in such deals. The valley people look on this series of buying
dramas as forward looking moves reflecting a dynamism whicl~ should he welcomed.
A symbolic example of the allure semiconductor makers have to the giant indus-
tries is the case of the takeover last December of American Micro Systems
(AMI) by the Gould Company, which is a large electronics, electrical machines,
and battery maker in the United States. Gould first displayed its interest
in the semiconductor industry in 1979 when it attempted to buy Fairchild and
Mostec but failed in its haste, but on the theory of "third time is the charm"
it acquired operating rights to AMI.
Aim for Industries With Technological Strength
It is only natural that takeovers are limited to those industries with techno-
logical strength. Ever since it became clear in January that the top maker of
micons, Intel, had its worst year last year, the talk among Wall Street stock
analysts has concerned "who will take over Intel." The same story may also be
applied to the third-ranking American company, National Semiconductor (NS),
which also seems to be having difficulty with figures running in the red.
It may be said that the American semiconductor industries are in the midst of
readjustment and change from an age of ease. As the VLSI age is about to be
entered, the question of where the vast capital will come from has emerged,
and these trends have suddenly accelerated.
"Amon~ the 36 companies which started operation before 1966, there are only
7 companies which can stand on their own in a completely independent manner"
(Survey Department of the Japan Choki Shinyo Bank).
Just as the American semiconductor makers were faced with this structural
cliange situation, the Japanese semiconductor makers grabbed the lead in pro-
duction of the first-generation VLSI p:~o~�ct, the 64 kilobit RAM (random
write in and read out memory), and rushed into the American market. These
Japanese companies included Nippon Electric, Hitachi Limited, and Fujitsu as
well as many which were active in production of the 16 kilobit RAM which pre-
ceded the VLSI and latecomers to the 16 kilobit RAM field such as Mitsubishi
F.lectric and Oki Electric.
Tt~e American companies which were able to attempt to counter this onslaught
wcre limited to the large, independent maker Texas Instruments (this company
actually produced its goods at its plant in Japan) and Motorola, while a com-
{,:~ny suct~ as Mostec which had come under the wings of another giant industry
wri~ in the midst of revising its VLSI strategy and could not counter. At the
onset of the 64 kilobit RAM war, it was only natural that "the Japanese forces
took over a 70-percent share (fraction of the market) of the American market."
Aim for End of the 1980 Decade
On the other hand, the VLSI war is "not limited to the 64 kilobit RAM but
concerns a long-term technology that will go into the 1 megabit class and
extend to the end of the 1980 decade" (President G.R. Moore of Intel).
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Ttx,se American semiconductor makers which have been able to fend off takeover
efforts and which h~ve assured capital certainly can be making such long-range
- plans aad engage in active investment in facilities. Lookiag at the trends
among aemiconductor malcers which have been taken over or have entered into
capital participation plans and the large independent nakers with regard to
the sc.ale of investment in facilities, it is evident that the investments by
those companies which came under the aegis. of giant industries increased
tremendously, although they still fall belcw those of the giant industrial
systems where abso]ute sums are concerned. Am~ong these companies, Mostec,
which was acquired in 1979 by the conglomerate United Technologies (UT)
which came to the fore as a primary air and space industry, doubled its
investment in facilities in 1980 to $850 million.
'fhere is an overriding feeling that these reorganizations within the American
semiconductor industry will be mostly completed within this year. The only
companies left for takeover are Intel and NS. 'T.he American strategy for the
entire 1980's decade will soon start rewing up its engines. Should the
Japanese challenge escalate too much, the anti-Japanese criticism wi~.l not
only echo through the valley but will also incite the big businesses under
which ttiese valley companies now operate.
Investment in Semiconductors (Unit: $1 million)
Large independent makers 1978 1979 1930
Texas Instruments 115 190 190
Intel 85 82 125
Motorola 72 159 200
National Semiconductor 49 70 90
Makers tied in to external capital 23 58 70
Fairchild 40 50 80
Signetics 22 42 65
Mostec 19 42 85
Note: Compiled with data from Morgan Stanley Electric Rater Dataquest
Company
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F'OR OFMIC'lAL USE ONI.Y
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[18 Mar 82 p S]
[Article by reporter Nonaka]
[Text] Every time fr.icrion in leading technological areas such as semiconduc-
tors surfaces between the United States and Japan, the name of the computer
giant IBM comes forth in line with the instigator. During the open-door
problem involving the Japan Telegraph and Telephone Public Corporation 3
years ago, IBM, which was aiming at taking over Japan's commnunicatons market,
appeared prominently. At that time, IBM stressed its "main role as shadow,"
but it is a fact that the presence of IBM served as a bluff (threat) in the
Japanese-American negotiations. The result of the public corporation situa-
tion was that IBM and the corporation entered into a closed license agreement
(mutual exchange of patents agreement), and the merit of an open-door situa-
tion was clearly demonstrated.
Afireement in Recognizing Anti-Japanese Strategy
The rapidly accelerating introduction to the American market since the begin-
ning of the year of the Japan-produced 64 kilobit RAM (random write in and
read out memory) has become a new hotspot in Japanese-American trade friction.
The SIA, (American Semiconductor Industry Association) with deep ties to the
government in Washington, has esca]ated its anti-Japanese criticism. On the
other hand, the event that shook the concerned Japanese parties was the
appearance of the name IBM on th~ stage since the start of the "Japanese-
American semiconductor war."
It was said that IBM was talking to the Silicon Valley American semiconductor
makers in order to enter into joint production to counter the Japanese. This
news appeared in the 21 February edition of the San Francisco EXAMINER. This
was just pre~eding the visi* ~f Mr Fzaki, chairtnan of the Special Investigat-
ing Committee on International Economic Measures and a Liberal Democratic
Party member, to the United States to discuss trade problems.
A secret meeting was held on 20 February at Oakland in Florida. Those present
besides IBM were the fourth-�ranking National Semiconductor and eighth-ranking
Advanced Micro llevices (AMD), and these companies were represented by vice
presidential level people. Although Hewlett-Packard and Intel also had been
invited, they were have said to have declined. The names of those participat-
ing are not accurately known, but a consensus was reached to the effect that
"in order to counter the Japanese makers, which possess such vast financial
strei~th working under the subsidy of their govertnnent, American industry must
unite as one and enter joint production type cooperative efforts."
Formal Participation in SIA
'Ccilk tl~at IBM would eventually be coming to the forefront of this Japanese-
American semiconductor war was heard continuously during the past year. IBM,
which is the world's largest semiconductor maker, had joined the SIA, which
is the foremost critic of Japan, as the 44th regular member in December 1980.
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The SIA was organized in March 1977, spearheaded by five large makers of the
valley including Intel and Mostec. The sesniconductor makers, which were be-
coming increasingly aware of the Japanese menace, gradually were taken into
the SIA fold, and cn 4 April 1977 when then Prime Minister Fukuda, on a visit
to the United States, met with President Sanders of A1~ serving as a represen-
tative of the American industry, Sanders asked for the lowering of Japanese
duties and relief from the government-backed sales to the United States. This
was the starting skirmish of the Japanese-American semiconductor war.
The entry of IBM, which in the past had been loath to join any specific trade
~ nrganization and now had become a flag waver, into the SIA was a shock to
Japanese industry. With this new member, the SIA secured its position as the
sole representative of the American semiconductor industry. The only maker
wiiich is not a member is possibly Texas Instruments, which has production
plants in Japan. The SIA activities suddenly intensified. Well-informed
sources say that ever since fellow state resident Reagan became President
of the United States, lobbying by the SIA in Washington has intensified to the
extent that it has been said: "There are many empty seats at board meetings
in tt~e valley."
Various speculations have come forth with regard to the conference on ~oint
production between IBM and the valley semiconductor makers. IBM adopted a
policy of outside purchase of the 64 kilobit RAM, which is the focal point
of the present Japanese-American semiconductor war, and the Japanese side has
taken over a 70 percent market share (fraction of the market) of this product,
so that IBM's source of supply may be endangered. If it acts in concert with
the SIA to fight against importation of the 64 kilobit RAM from Japan, it can
deal a blow to rival American computer makers such as Honeywell. This is the
rationale given for engaging in these high-level tactics.
In any event, it is a fact that IBP1 has contributed to this reemerging semi-
conductor problem, and the SIA has begun to flaunt the threat of this power-
ful new "aid." Where IBM is concerned, "the computer prob lem follows the
semiconductor"; IBM is probably planning to exploit the large administrative
force it displayed during the public corporation problem once again.
"lt is said that tl~e research and development budget for 1981 was more than
$1.6 billion, of which the greater part was semiconductor related," and for
this company which is also a"giant" in the semiconductor area to be pushed
to center stage shows the threat the Americans feel regarding the latent
capability of the Japanese makers.
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[19ttar82p5]
[Article by reporter Kato]
[Text] Although it is not apparent on the surface, the U.S. Department of
Defense is said to be strongly stressing an anti-Japanese regulatory stance.
The rise to the fore of Japanese semiconductors, and particularly VLSI (very
large scale integrated circuit) products such as the 64 kilobit RAM (random
write in and read out memory), has brought forth the statement that "This
production }ias risen to a level that will overpower American domestic indus-
try, and this will make difficult any effective countermeasures in the event ,
of war" (WALL STREET JOURNAL of 5 February).
VLSI has become an instrument of national security and a strategic military
item in the United States. The COCOM (anti-communist country export regula-
tory co~nittee) product list includes military goods, nuclear power related
equipment, and high precision tool machinery, together with single crystal
silicon wafers, semiconductor diodes, IC (integrated circuitry), and many
other semiconductor and related industrial products.
I.arge Subsidies for V1~SIC
Ttie history of semiconductors f rom transistors to VLSI is said to run on the
same track as that of American militazy technology. The military's VHSIC
(very high speed integrated circuitry) plan started in 1979 is an important
example in which military technology and VLSI development are combined into
a single development.
Tl~i~ plan has already gone past tile preparatory research stage and is now on
the performance demonstration stage (1981-1984). This is a project in which
six largP companies--Honeywell, Hughes Aircraft, IBM, Texas Instruments (TI),
TR[J, and Westinghouse--are acting as prime contractors for the Department
of Defense and are working with their own cooperative makers with vast subsi-
dies from the army, navy and air force to further development of the next-
generation VLSI.
Ttie developmental objectives include a microcomputer with the capability of
performing 12 billion multiplications and additions per second and an element
with a circuit line width of 0.5 micron (1 micron = 1/1,000 millimeter) (a
64 kilobit RAM has a circuit line width of 3 microns) which are "super-
super LSI" with performance several stages above the 64 kilobit RAM or the 16
bit micon.
At the same time, these products must be able to operate normally under very
liarsh conditions such as exposure to high-level ionizing radiation and temper-
ature extremes of -SS�C to +125�C.
Ti~e 1)efense Department hopes to apply this "super-super LSI" development to
set up a battlefield information system or in radar in fighter planes to
assure itself military superiority. The U.S. Government plans to provide
$200 million in subsidies to promote the VHSIC plan, and this sum is expected
to ~row considerably.
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U.S. Goverinnent in Anti-Japanese Regulatory Stance ~
Preceding these events,.although limited to only a si:ngle product, the Japanese
forces overwhelmed the American forces in the initial conf lict over the 64
kilobit RAM, and the Defense Department is seen to have increased a~ixieties
over future national security. The U.S. Gover~ent, which had played a paci-
fying role with regard to the complaints of the SIA (American semiconductor
industrial association) during the previous friction, made a complete turn-
around this time to take the~lead in the anti-Japanese movement.
Secretary Baldridge of the Commerce Department said: "We cannot ignore (the
Japanese onslaught)"; the move by one sector of the top-level executive arm of
the government to evoke the provisions of the 1962 commerce expansion law on
"national security items," Article 232, to clamp down on Japanese-made semi-
conductors is none other than a manifestation that the direction taken in the
VLSI war was having great influence on the development of military technology.
The military is waving the f lag for a"strong America," while President Reagan
has made balance in military might with the Soviets one of his "sacred areas."
The retaliation against anyone who trespasses on these "sacred areas is
severe. Immediately after the rekindling of friction, the Department of
Commerce directed a statement to the six large makers "to promote development
and production of 256 kilobit RAM and the 1 megabit RAM and to be prudent
with statements that incite the country"--an unusual request. This, tao,
eventually boils nown to a violation of sacred areas and calls for a special
alert against uncalled for counterreactions.
The American semiconductor industry aside, in the midst of the uncertainties
of the private and industrial areas, there is continued growth in the mili-
tary, space, and air spheres. According to a survey made by the American
large semiconductor company ICE, the market scale for IC in 1981 for military,
space, and air increased 23 percent over the previous year, to more than
$600 million. Individual companies involved include Texas Instruments,
National Semiconductor, and Signetics, which are supplies at the $70 million
level.
In Japan, the Defense Agency recently issued contracts to large semiconductor
makers for research and development on a CCD (charge coupled device) with
infrared detection capability for missiles and tanks to be used as enemy
search units; this country has recently become very aware of the ties between
defen5e and LSI. On the other hand, the main strength of the Japanese semi-
ronductor industry has been in the private and industrial areas, and there is
l.ittle likelihood of any change in this situation in the near future.
Cost Difference Between Military and Private Sectors
Ti~e production cost of ordinary IC in the United States is said to be $2 per
unit in the private area and $40 in the military area--a wide difference.
'fhe government takes care of the cost end where the military is concerned,
- and tl~ere is no reluctance to allow high-level leading technology development.
This is an appealing market for the semiconductor maker. On the other hand,
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NOR OFFI('IAi. USE ONI.Y
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too much dependence on the military results in loss of cost control, as well as
the fact that development of other. market areas and of new products suffers.
'1'l~e clasli between the private industry-oriented Japanese forces and the mili-
tary-oriented American forces is now about to cammence.
[20 Mar 82 p S]
[Article by reporter Kato]
[Text] A party to announce the formation of the "High-Speed Calculation Sys-
tem for Scientific and Technological Research Use" was held at the Hotel Okura
in Minato-ku in Tokyo on 12 March. The party was attended by President Takunao
Yamamoto of Fujitsu, who will serve as chairman of the board of directors, as
well as by executives of semiconductor and computer companies along with top
government figures, arid talk was directed at developing production for the
21st century.
Director Seiichi Ishizaka of the MITI's Agency of Industrial Science and
Technology made a speech which was prefaced by the statement that "Recently
we have had the opportunity to read more articles written by foreign corre-
~ spondents," followed by "When the Americans hear of this party, concerned
people in the United States will become even more excited."
~ Director Ishizaka was right. The advancement of large sums of money by the
Japanese Government to subsidize VLSI (very large scale integrated circuit)
development is outrageous" is the criticism which has flared up anew on the
American side.
Large Makers Take Divided Charge of Element Development
The objective of this group is the establishment of a practical technology
for a super computer to perform work such as aerodynamic computations asso-
ciated with aircraft and treatment of graphic information transmitted by
satellite which cannot be undertaken by the present generation computers. One
phase of this pro~ect is the development of new high-speed logic (logic ele-
ment) and memory (memory) to replace the silicon used at present; this effort
is being broken down into different categories, of which the large makers of
the industry will take charge of development, includin~: 1) Josephson
coupling element, 2) HEMT (high degree of electron mobility transfer)
transistor, and 3) gallium arsenide electric field ef�ect transistor.
On 12 February, about a month before the organization of this group, a party
commemorating the formatior of the "New Capability Element Research and Devel-
o~~ment Association formed in conjunction with the establishment of the basic
t~chnological research and development system of ttie next-generation industry
by MITI was held at the same site. This association also announced targets
for development to be used in the next-generation VLSI: 1) super lattice
ele~nents, 2) th~ee-dimensional circuit elements, and 3) environment resis-
tant elements. At this party, former Prime Minister Takio Tanaka of the
Liberal Democratic Party wore a necktie pin adorned with an IC (integrated
circuit) which had been presented by Mr Suxuki 10 years before when he had
visited a certain semiconductor plant, and he encouraged the industrial
leaders gathered around ta "dig in."
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Both of these organizations are slated to receive more than 200 billion yen in
subsidies from the government over the next 10 years. The contributions of the
constituent members, which are private companies, are e~ected to top the gov-
ernment subsidy level. It is easy to see why the American side, which fell
behind in its initia? skirmish on VLSI, is keeping a very wary eye on the re-
search and development system for the next-generation VLSI on the part of the
Japanese.
There Are Also Large Subsidies in the United States
On tlie other hand, it cannot be said that the American criticisms are com-
pletely on target. There is the VHSIC (very high speed integrated circuit)
which is being promoted mainly by the Department of Defense, in addition to
subsidies granted by NASA (National Air and Space Administration), the NSF
(National Science Foundation), and the Department of Energy to promote VLSI
research and development. It may be said that the Americans and Japanese are
roughly on an equal footing where research and development systems and govern-
ment subsidies are concerned.
In fact, the Japanese subsidies have provisions for some form of return through
profit payments after a fixed period, which is very close to a no-interest loan;
the Japanese companies have to operate under more severe conditions compared
" to the one-way handout of the U.S. Government subsidy plan.
Certainly, the Japanese Government has played a ma3or role in the development
of Japan's semiconductor industry. The "Kiden Law" enacted in 1971 (special
law on management of certain electronic industries and electrical machine in-
dustries) clearly spells out the plan to raise the level of the semiconductor
industry (Article 3) and even states that the government will serve to assure
funds and make loans (Article 5). One factor responsible for the growth of
tl~e Japanese semiconductor industry to the 1-trillion-yen level in 19$1 is
tt~e government and the skillful manner in which the Ministry of Indusrry and
International Trade guided the development.
In other words, the criticism the American side levels against the Japanese
VLSI research and development system may be a rehashing of the "criticism of
Japan Inc." in somewhat modified form. Recently, the influential American
economic magazine FORTUNE compiled a survey of Japanese and American busines~
leaders' opinions. One of the questions asked was: "Of the two countries,
- the United States and Japan, which gives its businesses greater capacity
where regulations and administrative actions are concerned?" and 76 percent
of the 491 American business heads who replied cited Japan.
SIA Looks for Favorable Plan
a result, there is considerable feeling that the true aim of the recent
SI.A (American Semiconductor Industry Assoc~ation) criticism of Japan is to
make Japan the scapegoat and thus extract very favorable treatment from the
U.S. Government. The �act that it even criticizes the adversary country's
research and development plan on the next-generation VLSI indicates that
should it change its stance, this wi11 result in internal government intFr-
ference.
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- Kc~ cl~at ax It may, it is evident from the fact that the U.S. Department of
Defense has been drawn into the picture that this present friction has gone
beyond the private sector and industry level to come to the national security
level where the electronics revolution and VLSI development are involved.
Thus, we can expect some emotional outbursts as this friction develops from
industry versus industry to the stage of government versus goverrnnent.
Research and Development Organization for Next Generation VLSI
Research Theme Private Contractor
New Capability 1. Super lattice element Fujitsu, Sumitomo Electric
Element Research 2. Three-dimensional Industries, Hitachi, Nippon �
and Development circuit element Electric, Oki, Sharp, Toshiba,
Association Mitsubishi Electric,
Matsushita, Sanyo Electric
3. Environment resistant Hitachi, Toshiba,
reinforced element Mitsubishi Electric
High-Speed Comput- 1. Josephson element Fujitsu, Aitachi,
ing System for Nippon Electric
Scientific and 2. HEMT Fujitsu, Oki
Technological Re- 3. Gallium arsenide (Logic) Hitachi, Mitsubishi
search Use (new electric field Electric
element research effect transistor (Memory) Nippon Electric,
section only) Toshiba.
[22 Mar 82 p 5]
[Article by reporter Nonaka]
(Text] On 16 February, the seventh rankins semiconductor maker in the world,
the American Fairchild Company, disclosed its plan to move into Japan. Presi-
dent Robert Skarko of Fairchild Japan, which is this company's Japan-based
corporation, who was interviewed by this reporter at the Keidanren Hall in
Ote-machi, Tokyo, announced: "We will invest about 21 bi~lion yen in the
construction of an integrated IC plant at the Isahaya industrial p~rk in
Isahaya City, Nagasaki Prefecture, which we hope to complete by ?_�s5."
Aim at Opening riarket in China
Fairchild merged with Tokyo Denka Kagaku Kogyo (TDK) in 1971 and has a history
of making plans to enter the Japanese market while retrenching. Despite such
a background, it now plans to start a lavish production program at its Isahaya
plant, but when the reporter asked "What will be the production scale?"
and "What sales volume will you be striving for?", President Skarko avoided
any definite answers. "We will initiate operations next August for assembly
oF tt~e logic IC and linear IC which are in such high demand in Japan" was all
that t~e would of fer.
It is said that the k~~y to this closemouthed stance is China. f;chlianberger of
France, which took over Fairchild in 1979, held a directors meeting which acted
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N'(fR ONhI('IA1, l1SH: UNI.Y
upun tl~c plans to enter Japan and at the same time reportedly made the decision
to route the production of its Isahaya plant to China. Schlwnberger, which is
known worldwide as an oil explorer, previously put forward a plan to partici-
pate in the technological end of oil field exploration in China and has long
had its eye on the Chinese :~arket. The reason behind the decision to locate
its semiconductor production site in Japan at Isahaya is said to be the proxi-
mity of this city to the Nagasaki airport, which is one terminal of regular
China-Japan air service which will facilit.ate any approach to the Chir~ese
market.
This is the first effort by any American semiconductor maker to initiate a
trade strategy aimed at China, and one can understand why Fairchild is unwill-
ing to reveal the production plans for its Isahaya plant.
'Che world's largest semiconductor maker, the U.S. Texas Instruments (TI), has
started production of 64 kilobit RAM at its Miho plant in Ibaraki Prefecture
and lias assigned this Plant to be its VLSI supply base.
'Tl~e design center which will be the site for circuit design and development
wti.ich tt~e top micon company, Intel of the United States, constructed at the
TSUkut.~a Research and Academic City in Ibaraki has been completed. This com-
pany will set out to develop new products here destined for the world m,�~,:._Pt.
Tl~e top radio communications maker and second semiconductor maker in the
United States, Motorola, merged its three subsidiary plants in Japan for which
it advanced all the capital and established Japan Motorola, and it plans to
set up a VLSI mass production plant in the Kyushu area.
Exploit Superior Brainpower
Tliese are all events which have taken place during the past year. The various
American makers are stepping up their activities in Japan and have made their
Japanese companies large pillars in their worldwide strategy. "Japan is the
second largest market next to the United Sta~es and it has great growth poten-
tial" (President Cozdon E. Moore of Intel) is typical of the expectations of
Americans, and they intend to exploit to the maximum degree the concentration
of hrainpower and ttie highly productive labor force.
On 17 riarcli, TI gave the recession (business stagnation) as ttie reason for
r~:lea~ing about 3 percent of its work force, 1,700 workers, indefinitely (no
cl~Cin.i.te rehiring date, temPorary dischar;c f rom work). Ttiese layoffs were
to talce place at the Houston and Dallas plants and to involve workers in semi-
co~icluctor plants. This is a good reflection of the status of the American
sE>mi.conductor industry, which is suffering from the longlasting recession,
whil.e TI's Japanese company is putting fancy ads in newspapers and magzzines
to the effect that "Join J. Kilbey (the technologist who developed the first
IC in the world in 1958) in his second effort to push the micron limit" as
it goes all-out for manpower.
Following Fairchild and its decision to locate a production site in Japan,
Intel, which completed its design center to give it a foothold in this busi-
ne55, and A1~ID laid plans to build plants in Japan in 1983; the activities of
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MOR OFFIC'IAI. UfiE ONI.Y
An?erican companies have become quite noticeable. Leading American maker Analog
Devices, eyeing development in Japan for semiconductor type products such as
the AD converter (semiconductor which~ converts analog information into digital
information) used in VTR and audio, completed a technical center at Tsukui in
Kanagawa Prefecture and will soon start actual production. In this way, the
number of companies locating plants in Japan is increasing.
Japanese Side Strengthening Its Plants
On the other side of the picture, leading Japanese makers such as Nippon EZec-
tric, Hitachi Limited, Toshiba Corporation, and Fujitsu all are producing IC
at their plants located in the United States, and some rapid moves are being
made to locate second plants. Nippon Electric is investing roughly 20 billion
yen to build a VLSI production plant in Roseville City in California, where it
plans to produce 3 million units of VLSI products including the 64 kilobit RAM;
this will be its second plant.
That is to say, the business strategy of the Japanese and American semiconduc-
tor makers has shifted from semiconductor trade to emphasis on locating plants
on the other country's home ground. Electronic Industrial Association of
Japan (president, Sadakuzu Shindo, president of Mitsubishi Electric) which has
been keeping close watch being concerned about the rekindling of the Japanese-
American semiconductor war refuted that "capital investment and technology
exchange have already been actively conducted in the form of mutual extensions,
and the semiconductor industries of both countries are in mutually supplemen-
tary relationships' based on the above stated background.
This era of mutual extension on the part of Japanese and American makers
actually involves the siting of plants on the home soil of the adversary.
Compared to the situation in which all four of Japan's top makers are "in
step" locating in the American market, the advance of the American companies
into Japanese territory is only just beginning. As can be seen by Fairchild's
move to construct a plant for production aimed at China, the strategies of the
American makers may involve some very clever ideas. The Japanese companies,
which know only too well the threat of the United States when it gets down to
brass tacks," are increasing their guard against the moves of the American
makers, which threaten to jump in and reach deep down into the pockets of the
Japanese market and establish VLSI production strongholds.
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MOR OFMICIAL USE ~(3NLY
Mutual Extensions of Japanese and American Semiconductor Makers
Indicates Planned Construction)
Name of Company Plant 3ite
(Japanese side)
Nippon Electric NEC Serniconductor America Mountain View, California
Roseville, California
Hitachi Limited Hitachi Semiconductor America Dallas, Texas
Toshiba Toshiba Semiconductor USA Sunnyvale, California
Corporation
rujitsu Fujitsu Microelectronics San Diego, California
(American side)
'Cexas Instr~unents Japan Texas Instruments Hinode-machi, Oita-ken;
Kamogaya-shi, Saitama-ken
Motorola Japan Motorola Shiokawa-machi, Fukushima-
ken (joint with Kaizu Toko)
Fairchild Fairchild Japan Isahaya-shi, Nagasaki-ken
Analog Devices Analog Devices of Japan Shiroyama-machi, Tsukui-gun,
Kanagawa-ken
Intel Intel Japan Tsukuba Research and
Academic City, Ibaraki-ken
[26 Mar 82 p 5]
[Article by reporter Nonaka]
[Text] It was when the deputy USTR (Uniteu States Trade Representative),
Macllonald, visited Japan to attend a Japanese-American trade subcommittee
meeting and American demands to open up the Japanese market were increasing
day by day that "Japanese challenge in the leading technology area of semi-
conductors (Secretary Baldridge of the Department of Co~erce) had become
the top focal point in the Japanese-American friction.
Iiitachi With Fine Act
Hitachi stepped foYward to play the role of temporarily pacifying this "con-
centrated firepower" (industrial leaders) of anti-Japanese criticism with
regard to semiconductors. Hitachi on 2 March had announced a technological
agreement with the large American electronic equipment maker Hewlett-Packard
(tIP) in the field of 64 kilobit RAM for VLSI (very large scale integrated
circuit). Just when the SIA (American Semicondtictor Industry Association)
was screaming for import regulations on Japanese-made 64 kilobit RAM, Hitachi
demonstrated a stunt blowing away the rumor that Hitachi is lacking in poli-
tical sensitivity.
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The Ministry of International Trade and Industry, which has the role of being
a leader for the development of *he Japanese semiconductor indust~-y, praised
- this effort highly. The Hitachi statement coincided unexpectedly with a
press meeting following a cabinet meeting and the minister of international~
trade and industry made the following statement:
"'fhere has been an active interchange of capital and technology in the past
regarding semiconductors between the United States and Japan. The HP and
Hitachi agreement is one of good examples that show the fact that Japan recog-
nizes the importance of cooperative relationship and the need to exist even
in the foremost technological field of the 64 K RAM.
This agreement stipulated that Hitachi would provide IiP with N channel MOS
(metal oxide film semiconductor) process technology to produce 3-micron-width
(a micron is 1/1000 of a millimeter) circuits for the 64 kilobit RAM and the
mask-producing technology which HP hopes to use to mass-produce 64 kilobit
RAM for use in minicomputers and measurement equipment. This is the first
case in which a member of the Japanese-semiconductor industry has entered into
a cooperative agreement with a foreign company on the 64 kilobit RAM.
The Japanese makers succeeded in capturing 70 percent of the market share
(f raction of the market) for 64 kilobit RAM. Hitachi is the top maker and has
garnered 50 percent of the share, so it has been subjected to fierce criticism
from the American side, and it probably considered that it had the responsi-
bility of taking the lead to avoid this f riction from the standpoint of "the
nation's interest" (Hitachi top figure).
It is known that HP had previously given a high evaluation of Japanese-made
semiconductors based on their exceptionally low reject rate. When computer
makers and similar companies purchase semiconductor products, they try to
~ diffuse the risk by making product purchase contracts with two or more com-
panies. On the other hand, this present agreement between these two com-
panies relates to the provision of production technology, and even though
HP [iad favored Japan, the shock was nevertheless great.
Unexpected Reaction by American Side
However, the reaction of the American semiconductor makers of Silicun Valley
was not what Hitachi (or the ministry of International Trade and Industry) had
expected. Well-informed sources had reported that: "They in the valley who
have been worried that the Japanese are rapidly gaining upon them feel that
our self respect has been trampled." As proof of this statement, the sources
stlte tiiat the U.S. semiconductor industry suddenly started to move toward a
dumping suit for the principal instigator).
Hitachiand HP are champions of leading technology and tt~is agreement between
tl~c two drew attention to the situation that the cooperative efforts between
industries in ttie semiconductor area was accelerating on an international
scale. There is particularly fast formation of the second-source (secondary
supplier) family among leading semiconductor makers of Japan, the United
States, and Europe in securing the microcomputer which is the promoter of the
electronics revolution.
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- '1'lii~ f.~mi.ly int~�rrcl.iliuntiliL~~ neLwork links Int~al wltli Nl~~pun I~:l~�ctrl~� :inJ
. l~ujitsu and also Motorola witti Hitachi, so that companies which are fiercely
fighting each other in the semiconductor friction are holding hands. On
2 March when Hitachi announced its agreement with HP, it had people present in
New York at the announcement of the 32 bit micon by Motorola, and they stated
there that Hitachi will develop a peripheral equipment business as a second-
source maker for Motorola.
To be sure, cooperative agreements between American industries are also popu-
lar. Among these, the agreement between Advanced Micro Devices (ArID) and
Intel which is slated to continue for more than 10 years was a source of great
surprise to others in the industry. This involves ANID becoming the second
source for the 16 bit micon "8086" developed by Intel, which is why the con-
tract was signed; the scope of the agreement includes semiconductor devices
which will be developed in the f uture.
In addition, three companies--RCA, semiconductor maker Signetics of the United
States, and Phillips of Holland--have entered into joint development of CMOS
(complementary metal oxide film semiconductor) structured logic IC (integrated
circuit for logic circuit use), while Intel and General Electric are planning
to enter into a technological agreement on production of new semiconductors.
It is a busy situation at present.
As the situation of "bitter enemies in the same boat" was about to appear
among the giant makers as the VLSI age was being entered, Hitachi, which had
previously been active in cross license agreements (technological exchange),
l~oped to exploit this approach to dissipate the friction. This is a situa-
tion in which national boundaries were crossed over, and a.Japanese maker
took the initiative to participate in agreemQnts. Toshiba Corporation had
beat out the sparks of this friction before they got to Europe, and it
announced technological cooperation with the Italian semiconductor maker
SGS-ATES.
While trade friction including semiconductors was spreading, there was a ten-
d~ncy for the castigation fight to escalate between Japan and the United
States and even Europe, but there is a good probability that there will be
agreement between giant industries on the basis of a single technology,
multiple technology, or joint management in order to assure a future.
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16 Micon Family Relationship Diagram
~ Product Type and
Development Maker Second Source
v8086
Intel, United States Nippon Electric
Fuj iteu
Mitsubishi Electric
ArID, United States
Harris, United States
Siemene, West Germany
Matora Harris, France
v68ooo
Motorola, United States flitachi Limited
Mostec, United States
Rockwell, United States
Signetics, United States
Thomson CSF, France
Phillips, Holland
vzsooo
Zylog, United States Sharp
SGS-AT~S, Italy
vTMS99oo
Texas Instruments, United States AMI, United States
ITT, West Germany
[27 Mar 82 p 5]
[Article by reporter KatoJ
[Text] At about the time of the rekindling of the Japanese-American semi-
conductor friction in the middle of February, the 1982 ISSCC (International
~ Solid State ~ircuit Conference) was opened in San Francisco in the United
States.
The ISSCC provides the platform to which leading specialists from the semi-
conductor makers and research organs come to disclose their latest leading
technology and new products; a 32 bit micon was announced last year which
drew great interest from people concerned both in the United States and
~ abroad.
To Be Developed by 1985 Period ~
On the other hand, there was no single item at this year's ISSCC which drew
sucli interest. In its place special-use LSI (large scale integrated circuit),
with the customers needs the primary consideration, and design techniques for
VLSI were prominent in their number. The specialty of the Japanese semicon-
ductor makers, the low power consumption CMOS (complementary metal oxide fiLn
semiconductor) product, was the main attraction at this conference. It may
be said that this conference was one which featured improvement of present
technology and discussed possible extensioris.
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I)i r~~ctur Makoto Kikuike of Sony's Central I.aboratory said: "Tl~e world's seml-
~onductor indutitry l~as (setting aside product growth but considering the tech-
nolooical aspects) reached a stage of maturity." Mr Kikuike is one of the
pathfinders of Japan's semiconductor industry. "The news of the invention of
the transistor was one such event, and up till the present time, one never
knew what new semiconductor developments would be forthcoming"; this has been
an age when this stimulating situation continued. But now, basic technology
and material development and discovery have virtually been completed.
The Kilbey patent, which involves placing a number of transistor and resis-
tance type elements on a single chip (small piece) of silicon base plat�:, and
the Planar patent by which a thin membrane is utilized to form many elements
on a silicon base plate type basic technology came to the fore before 1975,
while the eighties are expected to be taken over by MOS (metal oxide film semi-
conductor), semiconductor laser, and optical fiber type main line products of
the present electronic revolution. The basic research and development stage
for the one chip micon and CCD (charged coupled device) were essentially com-
plete by the sixties. The Josephson element, which is in the spotlight as the
most promising element of the next generation VLSI, already had its basic
theory developed about 1962.
~ i:mphasis on Improving Production Technology
Certainly, semiconductor industrial technological development is continuing at
a rapid tempo at present, and the race to produce a higher degree of integra-
tion or reduce computer computation time is taking place with no respite in
sight. On the other hand, these are only extensions of existing technology;
the developmental objectives are already fixed to a certain degree. "Devel-
opment is such that the end result can be foreseen, and it is not true
technological innovation" (Mr Kikuike) is the type of statement one hears.
Certainly there still remains the possibility ofsome epochtnaking technological
revolution rivaling that of the transistor and IC, but the activities in the
5emiconductor field, which is now entering the stage of maturity, are now be-
ing shifted to application technology, cost reduction, and higher reliability.
Tlic technological agreement between Hitachi Limited and i~ewlett-Packard and
the recent wave of technological agreements between giant American industries
arc all part of this same trend.
.J:i~>~1n iti weak in developing creative technology but is superior in applied and
production technology--the present resurgence in friction between these two
countries probably incorporates some of the American irritation caused by this
Japanese trait.
Very recently, two companies, Toshib a Corporation and Hitachi Limited,
announced a new element separation technology which allows circuit design of
1 micron (1/1000 of a millimeter) and submicron (less than 1 micron) width.
Nippon Electric is presently constructing a new plant which can handle S-inch-
di~~neter silicon wafers (present 4 inch, in order to improve yield. Fujitsu
lias developed gate arrays with a gate number (volume of information by logic
circuit elements) of 10,000, placing this in the top class in the world as a
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r~.~,rc~c~nt:itivc prc~duct oC Ilti ti~~micustom (purtinlly rsp~�~:lal ord~�r) I.S1 til~~~~�k,
wliile SONY has developed a new metliod for manufacturing higli class ~ilicon
single crystals called the "MCZ (crystal drawing utilizing strong magnetic
field) method." In this manner, developments in application and production
technology are actively continuing in Japan.
What Is the Friction?
These abundant application and production technology efforts are being
achieved by the large Japanese semiconductor makers, mostofwhom are entering
into closed license (technological exchange) agreements with large American
makers, thereby mutually canceling technological cost payments. The payments
made by this country's semiconductor makers in technological fees amounted to
about 10 percent of the total sales up to the latter part of the sixties,
about the time mass productiofl of IC ~as becoming a reality. "We paid high
tuition" (head of industry) was the type of comnent made. On the other hand,
the timelimit of 15 years has expired for basic patents such as the Kilbey
and Planar patents, and there has been a large decrease in such payments, so
that top companies such as Nippon Electric now only pay out about 1 percent
for such rights.
In this period of maturity where development and discovery of creative tech-
nology are dying down, high reliability and low cost are taking over. The
Japanese export of inemory to the United States had its start with the 4 kilo-
bit RAM (random write in and read out memory) in 1975, followed by the 16
kilobit RAM that captured 40 percent of the market share (fraction of the
market) and still later by the 64 kilobit RAM whick~ took over a 70-percent
- market share, all of which were the result of superior mass production tech-
nology and quality quality.. Assuming there will be no new development similar
to the one chip micon, which utterly devastat~d Japan, Japanese-American
semiconductor friction may only now be starting.
Main Technological Innovations in Semiconductors
Year.
1948 Junction transistor
1950 Single crystal drawing method
1951 Electric field effect transistor
1954 Vapor phase diffusion method
1959 Kilbey patent (IC)
" Planar patent
1960 MOS transistor
1962 Semiconductor la$er oscillation
" Josephson element theory
1965 Optical fiber
1968 MOS-IC
1970 CCD
1971 Micon
1974 Electron beam exposure system
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~"L9 ht.ir 82 p 5)
[Reporters roundtable]
[Text] The conflict between Japan and America over the standardbearer VLSI
(very large scale integrated circuit) of the electronics revolution is expected
to intensify and will certainly not abate. This series has discussed the back-
ground of this Japanes~~-American semiconductor friction along with the responses
to the various attempts at resolution, and has described the status of past
Japanese-American struggles over VLSI. This final article consists of a
roundtable discussion among desk people and the t~arious reporters.
Complexity of Background Is Problem
Desk: The semiconductor is one of the items of great concern to the ?J.S.
Government, which is actively trying to open up the Japanese market. After
being excluded f rom the Versailles suumit, the Japanese-American friction
seems to have the potential of turning around.
A: Hardly anybody even in the industry expected that the U.S. Government would
step to the forefront in the semiconductor problem. There are some who say:
"'Tliis is the result of President Reagan being from California, where Silicon
Valley is located." Such being thE case, there are other products of great
concern to the U.S. Government such as oranges and beef, which are also pro-
duced in California. President Hiroji Kobayashi of Nippon Electric said:
"This present friction is not one which will be resolved by semiconductors
alone" as he alluded to the complexity of the background of this present
controversy.
B: The elevation to the forefront of the opening of the Japanese market to
semiconductors by the U.S. Government has been met head on by the Ministry of
International Trade and Industry. The duties have dropped to the same level,
mutual advances in construction in the other's country and technological
agreements have multiplied, so there should be no cause for complaint. Even
regarding the issue of participation by American industries in Japan, at the
government-industry research and development organ meetings we have no recol-
lection of the American L-tembers being barred from participation. As Under
Secretary Fujiwara of th~: Ministry of International Trade and Ind~istry said
at tt~e outset of this recurrence of friction: "The semiconductor war is a war
witliout a battlefield," as he pointed to the difficulty in attaining a solu-
tion.
A: Even at that, the Ministry of International Trade and Industry has consid-
erahle concern with regard to the United States. The statement to the heads
~ of the large semiconductor makers "Do not make any statements that will incite
tl~e United States" is an extreme example of this stance. At the same time,
ever since the recurrence in friction, all the companies have had to keep
their mouths shut with regard to plans for future increase in production of
64 kilobit RAM (random write in and read out memory). It is now almost impos-
sible to discuss any plans on next-generation VLSI development. If the U.S.
Government is out to suppress leading technology in Japan, there is no telling
what unreasonable demands will be forthcoming.
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Dispel the Dumping Problem
Ih~Sk: Tliere was a time when dumping of Japanese semiconductors seemed to be
emerging as a problem. What is the situation today?
B: There is no clearcut picture as yet, but the SIA (American Semiconductor
Industry Association) did ask the Department of Co~erce to investigate dwnp-
ing, and it is said that one co~pany, Motorola, is pushing this.request. The
U.S. Government does not appear likely to act on this request without definite
proof and seems to be simply making some checks.
A: There is one industrial leader who said: "If there is to be a check on
dumping, let them do it right." The dumping problem has been a bitter exper-
ience for many of these companies because they experienced the same problezn
which required 12 years to resolve in the matter of color TV. They seem to
be saying: There is absolutely no dumping." There have been some companies
which since the recurrence of this friction have issued strict orders not to
be stuck with trifling incidents when dealing with American sales bases.
B: It is said that all of the Japanese makers with plants in the United States
are consistently making a profit, while the American companies are feeling the
effects of the recession, and the dumping problem is not one which any of the
companies seems to be deeply concerned about. An official of one company with
small export volume said: "If we should go to any excesses to expand our ex-
ports, we will be under severe peer pressure."
Desk: It seems that the formal announcement by Fairchild, which is nwnber 7
among the world's semiconductor makers, that it will locate a plant in Japan
came directly after this friction flared up again.
B: Setting aside this recurrence in friction, there is considerable desire on
the part of American semiconductor makers to locate in Japan. The success of
Texas Instruments (TI), which advanced to Japan in 1968, seems to be serving
as a stimulus. The profit statements of Japan TI have trended toward higher
levels over the past years to the 4-billion-yen level, and last year the profit
statement was also good. The reason TI is able to supply a large volume of
64 kilobit RAM to the American market along with the Japanese makers is be-
cause its plant in Japan (Miho in Ibaraki-ken) is well equipped for mass
production.
A: The head of a certain foreign financed f irm said that there is no other
customer like a Japanese user who sets such severe standards on quality and
delivery time. These practices, on the other hand, have contributed to the
improved reliability of Japanese products. The feedback effect of production
technology acquired in Japan is not something that can be taken lightly.
B: TI, wh Ich early in the game established an internationally diversified
industrial system, has been at odds with the SIA on this semiconductor fric-
tion problem from fairly early in the game. At the time of the previous
friction, President Shefford said: "Criticism of Japanese semiconductors is
off base. Rather than complain, you should be working toward expanding ex-
ports." Last year President Busey said at the stockholders general meeting:
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"We will not knock our competitors at this meeting. We will bring our fight
to the market." This is why there even has been a statement from among the
American makers that "anti-Japanese criticism is most vehement from the
medium- and small-business located in the valley. The real source of this
criticism is the American mediinn- and small-business problem.
A: This is why the changes taking place on the American scene, such as take-
overs by large industries and cooperative agreements between giant industries,
may serve to ease this friction somewhat.
llo Not Trip in the Moves to the United States
Desk: "What about the advances of Japanese makers in locating plants in the
United States?
A: It is said that very recently a certain Japanese maker was approached by
an American firm to ask if it could make use of an idle production line. The
labor situation and improved service to customers are still strong incentives
to locate plants in the United States. This can also be an excellent means to
further Japanese-American exchange and equalize opportunities.
B: It is not as simple as that. The problem in the United States at present
is not whether a semiconductor is made in Japan but whether it is made by
Japan. There is probably some emotional factor that a VLSI upon which Japanese
breath has spread itself is not good. This is not a problem to be solved
simply by locating plants in the United States.
llesk: If that is the case, it would be difficult even to set up a counterplan.
A: President Kobayashi of Nippon Electric said: "The Americans detest ambig-
uous responses most of all," but it is possible that Japan may develop its own
technology that is so creative that even the Americans will have to show
respect and thus put an end to this friction. Very recently, Japan's semi-
c�onductor technology has closed up considerably on the United States and has
evc~n been able to surpass the Americans in some products, although it still
lads considerably behind in basic research and future technology creative
strength.
B: Adults and children do not engage in fights. In this sense the semicon-
ductor conflict signifies that the Japanese have come rather close to the
Americans. When we look at the situation in the United States, where the
major oil companies and integrated electrical makers are ~etting into the
semiconductor field, future Japanese-American semiconductor production will
become adult versus adult confrontations. Both sides have strong parental
(government) support, but there is a good chance for this friction to take
on other forms.
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History of Japanese-American Semiconductor Friction
1977 March SIA is formed
April SIA leaders confer with visiting Prime Minister Fukuda on
IC problems
1978 March SIA members call for boycott of Japanese products
Ministry of International Trade and Industry established VLSI
patent disclosures
December General survey by ITC on IC initiated
1979 November Semiconductor white paper submitted by ITC on Japan-made
semiconductors
SIA submits complaint to USTR
1980 January USTR announced the SIA complaint is without foundation
1981 March SIA proposes industrial promotion plan to government
May Prime Minister Suzuki announces plan to lower duties on IC
at meeting of heads of Japan and the United States
September Japanese and U.S. Goveriunents formally announce lowering of
IC duties
December Share of Japan-made 64 K RAM on the American market hits 70
percent
1982 February SIA proposes anti-Japanese regulations to USTR, Secretary of
Commnerce Baldridge makes severe anti-Japanese criticism
GOPYRIGHT: ~Nihon Keizai Shimbunsha 1982
9923
CSO: 8125/1084-D
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JAPANESE-U.S. SEMICONDUCTOR COMPETITION, COOPERATION
Tokyo DENPA SHIMBUN in Japanese 29 Mar 82 pp 17-32
[TextJ Japanese-American Semiconductor Friction, First Establish Facts
T}ie semiconductor trade problem has again been stirred up since the beginning
of this year. The American criticism of the Japanese is almost as intense as
though it were breathing fire.
The bone of contention this time is that the Japanese have captured a 70-
percent share of the American market in 64 K RAM, and if this situation con-
tinues, the United States will be ousted from the top rank in the matter of
leading products.
The Japanese contend that the 64 K RAM is a product whose market is only now
developing and that crying about the share of the market at this time is pre-
mature.
Because the Japanese reply seems to make sense, the Americans have come out with
a complaint of dumping and special management in the interest of national
security--which are problems which the Japanese have diff iculty comprehending.
On the other hand, the Japanese industry is fearful that this incident could
become an administrative problem that could twist the problem between the in-
dustries of the two countries into something more serious. Healthy competition
is the driving force behind development, but the Americans claim unfair prac-
tices and say the Japanese are driving for a one-sided advantage.
Many unfair practices have been pointed out by the Americans, but the freedom
of tracle and f inancing adopted by the Japanese Government plus ttie lowering
of tariffs have wiped out any unf air relationships, and the Japanese consider
that they can go no further in trying to appease American business.
These unreasonable demands and criticisms are not completely beyond comprehen-
sion. It is not entirely clear that the Japanese-produced 64 K RAM have actu-
ally captured 70 percent of the American market, but assuming it is true, this
is only an initial trend in the market.
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Cven assuming that the narket is just on the threshold of growth, why did the
American side allow the 64 K RAM market to be taken over by the Japanese. Tl~is
is something for considerable consideration.
In order to assure themselves a stable supply of important parts, computer
makers order their parts from three or four semiconductor makers at a time,
and the common practice in the United States is to use a domestic maker as
the first choice in this matter.
In the situation that the American semiconductor makers are delayed in their
ability to supply 64 K RAM, important uses are shunted aside where introduc-
tion is involved, and the market has difficulty expanding. It is not that only
the Japanese can supply this product but that the Americans take the initia-
tive and work toward market growth- that is the desire of the Japanese.
It is the industry's view that the present trend of events was completely un-
expected, although there were signs 2-3 years befoY~e. There are a number of
versions, but what is clear at present is that the Americans were somewhat
delayed where the 64 K RAM is concerned. They were found wanting in the
structural design, process, materials, manufacturing equipment and various
other areas.
'Tt~e Japanese side was able to come up with silicon material with planar
quality of 2 microns deviation, masks which can respond in 12 minutes to 3
micron finishing, resists with very high purity, easily sectionable dry
etching and optimum structural design compatible with mass production.
Japan-made 64 K RAM are finding ready sales overseas, and the necessary mater-
ials and equipment are increasing. It might be better to state that they are
keeping up.
Two or three years ago the large computer makers and semiconductor makers of
the United States with sufficient insight into evaluating technology had al-
ready become aware of the superiority of Japan-made 64 K RAM and reportedly
were formulating some type of countermeasure.
Tliis series of events and the moves on the part of leading,American industries
such as Texas Instruments, Motorola, Fairchild, and IBM to reinforce their
~ semiconductor production in Japan are not completely unrelated.
In certain areas Japan has superior ability to improvise and it possesses
technological development strength such as large volume supply through mass
production. When one looks at the successive development of new technology
and superior materials which even American industry purchases in large
volume, there are some aspects of this anti-Japanese criticism which seem
beyond reason.
Tl~e semiconductor market is more and more going toward "mass production" and
"large volume utilization, and Japan is fast becoming "a country well suited
to semiconductor production." It is hoped that this situation can be compre-
hended.
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c;rcatly !~einforce Unsite I'roduction To Avoid Trade Friction
It is anticipated that Japan's semiconductor production will exceed the pre-
vi~~is year's production by some 20 percent, indicating a large rate of growth.
The entire semiconductor industry recorded 1-trillion-yen business last year,
and the industry expects this sum to reach 1.3 trillion yen this year.
Among the products whicli are expected to attain great growth are the micro-
processor and memory, while new products such as gate arrays and voice syn-
tliesis LSI are expected to expand very rapidly this year.
The economic situation around the world makes predictions difficult, but limit-
ing ourselves to this particular area, considerable growth can be expected as
the result of automation, greater conservation of power, conservation of re-
sources, and conservation of energy demand of society overall.
Criticism of Japan Intensifies
Altliough this is a very favorable area, the trade friction as represented by
~l~e Ar.?erican criticism of the Japanese 64 K RAM is a major problem. The semi-
conductor market in the Western world is in a state of recession, and the
criticism of Japanese industry, which is maintaining a good rate of growth
despite this situation, is increasing.
't'lit recovery of the overseas market is awaited, and there are signs that this
mi~l~t be on tlie way. It seems that the situation in the United States and
Gurupe is that semiconductor sales, which f it right in with automation and
conservation of power movements, are casting aside the effects of the reces-
sion and are beginning to expand.
Half Onsite Production, Half Export
This trade friction is not limited to semiconductors, but Japan's semiconduc-
tor companies are reinforcing their plan:.� for production in the other coun-
tries' home ground in an effort to avoid this f riction. According to the
plans of these companies, their overseas production is expected to increase
over the next 2-3 years. In the system that is being established, a large
portion of the semiconductors for the Western markets will be provided by
products made in the respective countries, with the remainder coming from
.I;ij~~in.
Location of American Plants in Japan Is Also Active
'CI~~~ situation is so f.avorable that the Japanese semiconductor market has grown
to the point that it has now attained the 1-billion-yen level. Last year's
~>raduction is estimated at 950 billion yen, while the 1-trillion-yen mark is
cYpected to be broken this year, reaching as high as l.l trillion yen.
- B~cause of this large market, there is activity among the American semiconduc-
t~r makers to enter the Japanese market. The movement in the semiconductor
industry is taking place as though national boundaries do not exist, which is
one of the features of this industry.
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The reason this market is expanding in this manner is the regularly increasing
growth in portable calculators, watches, television sets, stereo, VTR, comput-
ers, and communications equipment. Portable cal.culators, watches, and small
game sets are VLSI application p.roducts which are Japanese in origin and are
used throughout ~the world.
Sustain Growth of the Electronics Industry
The advances in LSI are sustaining the development of the entire electronics
industry, and despite the somewhat depressed state of the overall economy, semi-
conductors are pulling the development of the semiconductor industry along,
and their role is becoming more important.
"Diagnosis" of the 1982 Semicon~luctor ~Iarket
According to data of the Ministry of International Trade and Industry, Japan's
semiconductor (semiconductor elements and IC) pra3uction last year attained
the 1-trillion-yen level for the f irst time. The growth rate was 23.5 percent--
a high rate of growth. All of the companies are anticipating growth this year
between 15 and 25 percent. Although the market is experiencing very harsh con-
ditions, growth products and growing markets are acquiring strength, and this
is giving rise to large growth. This article will deal with "1982 Semiconduc-
tor Market Prospects" and present a compilation of the expected developments.
According to Ministry of International Trade and Industry statistics, last
year's production total (unless othe~aise stated, these statistics will be the
source of information, while import and export data will be taken from the
_ Ministry of the Treasury overall was 1,067,309,000,000 yen, or just barely
over the trillion level. Of this total, sales of semiconductor elements such
as transistors and diodes increased 28.8 percent over the previous year to
378.5 billion yen, while those of IC increased 20.8 percent to 68�i,754,000,000
yen. These results show that the rate of growth in IC production was slightly
below that of "semiconductor elements" last year, the first such instance
since the IC industry became established in Japan and contrary to the initial
predictions of the industry. Several hundred semiconductor elements are used
in a VTR set, and the great growth in VTR was responsible for this increase in
semiconductor element production, while the decrease in demand for memory
resulted in the relatively inactive IC market.
30 Percent Reduction From Peak
The reduction in production of audio equipment which surfaced in early autumn
last year greatly affected Japan's semiconductor company sales records.
Limiting ourselves to audio equipment, the present sales are about 30 percent
below the peak period; this is a serious problem even in the semiconductor
business world which is blessed with a comparatively wide application field.
'lt~is recession in audio equipment sales has continued since last fall; due to
this factor, the semiconductor makers in preparing their statements as of the
end of March are allowing for a 5 to 10 percent reduction in sales from the
originally estimated values. Furthermore, the calendar year statistics will
reflect the full effects of the recession and show even greater effects.
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V'I'It, w}iich was instrumental in greatly improving semiconductor demand last year,
l~as been undergoing regular growth this year as well, and although there are
wide differences between set makers, the demand is continuing to expand later-
ally in an orderly manner.
Thus, the overall private sector picture is one of recession, and the depen-
dence of the various semiconductor makers on this market is very large, so
various countermeasures are being developed. The problem is just when recov-
ery will come; the prevailing opinion is that the situation iG at its worst
now and that there will eventually be a return to increased demand. This
recovery may come as soon as July, according to many observers. In any event,
the audio picture is expected to recover during the latter half of the year.
At the same time, the various semiconductor makers are hoping that the set
makers will become active in new product development in order to ride out this
recession and thereby increase orders for semiconductors. It is said that when
ttlere is a recession, new semiconductor applications become very active, and
tl~is situation seems to be emerging at the present time.
Wt~en the question concerns what type of semiconductor product is in demand,
tl~e greatest demand seems to be for miniaturized and lightweight sets. In
addition, great expansion in the area of application is expected, such as
introduction of new technology to the signal treatment system of linear IC to
cut down noise. Demand for micons and opticaZ devices for automation and
power conservation of sets seems to be increasing.
Demand for Continued Development
In the same private area, apart from the production trend of VTR, it is said
tliat demand for development of new IC and LSI is becoming active. For exam-
ple, it is said that 1,000 elements or more of bipolar LSI may be introduced
in the signal processor of the central section, and CMOS microprocessors and
logic circuits introduced in the peripheral section control system.
Supplement the Private Situation Suffering From Recession
'i'I~us, the various semiconductor makers are introducing new equipment in hopes
oE expanding sales in order to bolster the recession-plagued audio area and
the dull VTR market.
Un the other hand, demand for semiconductors used in computers and OA equip-
ment is increasing favorably this year; all the companies regard this area as
a promising market to supplement the other semiconductor areas where the over-
all market picture is concerned. To this end, the semiconductor companies are
placing emphasis this year on intensified development of the OA equipment mar-
ket; the market in semiconductors for OA equipment use is expected to be the
top battleground this year.
According to some test calculations by a one semiconductor maker, semiconduc-
tors for OA equipment use will increase on the average 25 percent per year up
to 1990, and the sales will expand from almost 100 billion yen this year to
= 170 billian yen in 1990. The market makeup this year is 34 percent memory,
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22 percent micon, 22 percent bipolar digital, 11 percent MOS digital, and the
remainder individual semiconductors.
Many Experienced Industries
As is evident from these test calculations, memory and micon products account
for more than half the OA equipment use semiconductors, and the remainder are
for peripheral circuit use such as for interfacing. The feature of this mar-
ket is that the companies involved include many more experienced members com-
pared to those of VTR, while the life of the products is between half a year
to a f ull year--extremely short. There arte about 20 companies just in pancon.,
It is said that there are more than 30 cumpanies in word prQCessors, including
the OEM makers.
It is to be expected that the race to sell samiconductors for OA use will in-
tensify ~ust as the OA equipment market is being bitterly contested, and the
product development strength and sales strength of the various se.miconductor
makers will be sorely tested. On the product front, high-speed operating
microprocessors and memory products along~with short delivery time gate array
stand out, and the general view is that technology and particularly soft sup-
port capability will be in the limelight on the sales front.
Foreign Funded Systems Entry
There was essentially no foreign funded maker present in last year's semi-
conductor market's prime battlefield, the VTR, but this outside influence
will be seen in the OA area, and competition in this area is expected to pick
up.
To the Japanese makers, which led the world in the matter of VTR, the OA equip-
ment represents a new market for the future. The interchangeability of soft-
ware for microprocessors for pancon use is becoming an important item, and
the market development plans seem to be completely different from those of
VTR.
Growth Companies Are Micon and Memory
What are the products which are expected to show great growth in this year's
semiconductor market? The following is a compilation of the views of various
semiconductor companies.
The top product is considered to be the micon. This involves a large market
(presently estimated at 10 million units LSI per month); the monetary value
is expected to increase a minimwn of 30 percent this year. It is ex~~ected
that the general-use 8/16 bit used in pancon will have to grow at least 50
percent.
Memory is another product that should be ranked with the micon as a promising
product. Even though the price war in 64 K RAM is an item of concern, this
year's production is expected to hit the 100-million mark, or roughly five
times last year's production of slightly under 20 million units. Mask ROM,
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EPROM, and static RAM are expected to be great contributors to the profit
picture, and there is good possibility that various ROM for Kanji use will be
the star of the memory area.
The market for gate array and voice synthesis LSI is small at present, but
these are promising products whose applications are expected to increase this
year. Both tend toward custom-made products ane~ thus are not sold immediately,
so the market is expected to expand gradually, and its movement is being closely
watched.
In addition to IC and LSI products, there are digital interface products used
in micon periphery, linear products, and small-package standard digital IC
which are expected to see good growth.
In another area, since last year the so-called discrete semiconductor element
has shown an increasing rate of use in the form of small package flat back pro-
ducts. Other products are switching type 3evices for power source use, power
devices for automation and power conservation applications, and optical de-
vices, and all of these are expected to experience good growth.
Semiconductor Market Viewed Through Statistics
Tl~e various semiconductor companies have various views on just how Japan's
semiconductor industry will grow this year, and here we will use some statis-
tics to make a simple analysis of the situation.
50 13illion Reduction in Audio
First, we will look at one of the areas that is relatively depressed and see
what effect it will have on the semiconductor demand. The area which was de-
pressed this spring was audio equipment (including automobile use radio/
stereo); production is down 1.3 percent from its onetime peak. There has been
growth in some areas of microcassettes and headphone type stereo, but assum-
ing that this present situation will continue for the rest of the year and
witti semiconductors and IC used by the audio equipment industry accounting for
nearly 20 percent of the total production and being a large market, it can be
expected that there will be a reduction of roughly 50 billion yen in sales.
At the same time, the market in color TV has been stagnant, production has not
increased, and only lateral movement is expected this year. We will assume
tiere that demand for consumer-use electronic goods o*_her than audio equipment
will decrease by 10 billion yen.
In additi:on, household-use micon-equipped products are increasing, and even
assum:ing consim?ption has leveled off. , tlie related se~niconductor demand is
expecteci to remain firm.
Thus, market demand is expected to decrease by 50 billion yen in the audio
equipment area, while television is expected to decrease 10 billion yen. The
demand for pocket calculators, watches, cameras, and musical instruments is
of some concern, but the fraction of the market accounted for by these products
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is relatively small, while, on the other hand, growth in games is large, so
that no great change is expected in this area.
OA To Increase 30 Percent
~ On the other hand,the extent of growth in the areas where growth is expected
is the item of concern. The product which all the companies are looking at
is OA equipment, and a large growth rate of 30 percent is predicted for this
area. When it is considered that OA accounts for 5-6.5 percent of the coun-
try's semiconductor production, a 30-percent increase is equivalent to a
little more than 10 billion yen. The computer and its peripheral and terminal
equipment are also expected to grow by 30 percent, and this will be accompanied
by a 25-percent increase in IC and a little less than 3 percent in semiconduc-
tors, which spells out a 25-billion-yen expansion in sales this year.
Fi~ gruwth is also expected in other semiconductor using products, such as
measurement equipment and coimnunication equipment. The rate of use by auto-
mobiles is said to be only 2-3 percent of the total, but this is an area which
has the potential of increasing with the greater electronification of automo-
biles.
. 'Iotaling the increases and decreases in semiconductor demand for the different
product areas, the minus quantity attributable to audio equipment type private-
use products of 60 billion yen campares to the 35 to 40 billion yen increase
by OA and computer related areas, to show an overall decline of 20 to 25 bil-
lion yen.
New Demand f o r VTR U s e
At this rate, the semiconductor market in Japan would be in a minus situation,
but this picture may be greatly affected by the trend in production of
household-use VTR.
The VTR-use semiconductor demand last year, including that for cameras, was
more than two times and close to three times the preceding year's total, at
about 120 billion yen, and the associated increase in IC was 13.4 percent of
tlie total domestic consumption, while the increase in semiconductors was 16.7
percent.
Even assinning this year's VTR production will not match last year's sharp
growth and will probably become more stabilized, the trend to IC use has
intensified, which necessarily means that there will be new demand for semicon-
ductors on the order of several tens of billions of yen.
Looking at the overall picture, it cannot be denied that this is a harsh envi-
ronment, and the efforts of the companies to develop new applications will be
reflected in their records. New developments can be classified into short-,
medium- and long-term developments, but the increase in sales in this area
comes from general-use products rather than custom-made.products, and the
differences in sales strength and new market development will create the
differences in company records.
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Stern Look at Exports
~n tlu: export front, tlie ecunomic situation in the Western countrics remaLns
in a state of stagnation, and a stern view of this situation is the prevailing
attitude of the various companies. Exports of semiconductor elements last
year increased 15.8 percent over the preceding year to 72.17 billion yen, while
IC showed an increase of 8.9 percent to 199,639,000,000 yen. The IC exports,
whicli for the past several years had been doubling annually, were thus blunted,
and this was attributable to the recession in the memory market and the reces-
sion in the Western countries.
Wtiile sales of LSI for calculator and watch use to Southeast Asia have bottomed
out, the memory products destined for the United States and Europe have been
joined anew by the 64 K RAM, so substantial growth may be expected.
On the other hand, anti--Japanese criticism has been escalating in the Western
countries, as a result of which the domestic semiconductor makers are taking a
discreet attitude toward 64 K RAM. The total production of 64 K RAM through-
out the world last year was 100 million, which is expected to increase sharply
to 600 million this year; the market scale is expected to increase from less
tl~an 20 billion yen last year to just under 70 billion yen this year, display-
ing its pror.iising nature. The Japanese semiconductor makers, while reinforc-
ing exports to the Western countries, are also increasing th eir production in
foreign countries in an effort to avoid friction.
Import Semiconductors Also on Trial
Imports overall totaled 155.6 billion yen, an increase of 9.7 percent; the
small rate of increase has continued for the past 2 years. This breaks down
to an increase of 27.5 percent for semiconductors to 37,253,000,000 yen, and
an increase of 4.9 percent for IC and total value of 142.53 billion yen. The
reason this growth in semiconductor elements was greater than in IC, just as
with domestic production, is the reverse export from the Southeast Asian
plants of the domestic makers and the new activity on the part of Korean
makers.
The domestic market is less active this year than last, and imported semicon-
ductors are expected to face rough going overall.
UeSpite this situation, technologically advanced products such as microproces-
sors, memory, and linear IC are expected to show large increases, and the
de~sperate struggle in the export picture is expected to intensify greatly.
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~
1 � ~
~o ~
~
~
~~(1) .
~ ~ v 2 )
i �
{ io .
. i � ~ ~f
rigure 3. Domestic Semiconductor Figure 4. Domestic IC Use Classifica-
Element Use Classification tion for 1981
for 1981
Key : ~Y ~
(1) Automobile use (1) Computer terminal equipment use
(2) Measurement use (2) Audio equipment use
(3) Communication equipment use (3) Portable calculator use
(4) Audio equipment'use (4) Communication equipment use
(5) Office equipment use (5) VTR use
(6) Television use (6) Office equipment use
(7) O thers (7) Toy use
(8) VTR use (8) TV use
(9) Computer terminal equipment use (9) Watch use
(1O) Camera use (10) Automobile use
(11) Houseliold electric equipment use (11) Vending machine use
(1'L) Compiled by DEMPA SHIMBUN (12) Facsimile use �
(13) Household electric equipment use
(14) Camera use
(15) Compiled by DEMPA SHIMBUN
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Recession Is a Good Opportunity
"A recession is a good opportunity" is a term often used fn the semiconductor
field. New product development becomes more active the more serious the state
of the world economy, and semiconductors are the tickets to development.
This is not a recession year, but talk of the type presented above has been
making the rounds among concerned people in the industry.
- Micon Is Representative Example
The term the deeper the recession, the better the opportunity" was aptly
demonstrated by the performance of the micon during the dark days of the oil
crisis in 1973. Up till that time, about the only micon use was in electronic
registers, but the oil crisis was the dividing point when the micon began to
be used in various types of equipment. It was about this time that the micon
kit made its appearance, and the micon in a box developed in the United
States, which was the predecessor of the pancon, also appeared about this time.
While this situation may have been the result of a chance overlapping in tim-
ing, the micon kit and the micon in a box rolled up unexpectedly good sales at
that time. The economy was in a highly stagnant state, and if everyone had
been occupied with his daily duties, these products might not have found such
ready sales, according to those in the semiconductor industry.
Fling Aside Reverse Boundary
Looking still further back into history, to the days when semiconductor work
involved a very difficult environment with a strong so-called reverse boun-
dary, it was only by cutting through this reverse boundary that the buds of
development were able to grow. The IC developed for the military came into
general use in the United States about the latter half of the 1950's and into
the 1960's, along with the end of the first stage of Apollo and the end of
the Vietnam war, and the micon~entered into the race for lower cost portable
calcula~tors and other sideproducts which weathered this crisis.
Judged by past trends, the semiconductor may be said to be in almost a blessed
state regarding the way it has developed. Japanese production has passed the
1-trillion-yen mark and has reached a state in which it can remain unaffected
by sm~111 economic instabilities.
Expect 18 Percent Growth This Year
L'ven though everyone says things are bad this year, according to the data put
out by the Japan Electron Machine Industrial Association last year, 18.1 per-
cent growth is expected this year, to a sales total of 1.26 trillion yen.
A growth rate of 18 percent in the f ace of a declining GNP is, objectively
speaking, a high rate of growth, but this is an industry which has maintained
an average 25 percent rate of growth through 1979, 1980, and 1981,.and the
statement the greater the recession, tha better the business, seems to apply.
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Why are the leaders of the semiconductor industry using such terms? While it
m~y be true t}?at investments in the semiconductor area require vast sums which
must be amortlzed in order to continue this development, the potential for much
greater growth in this area also seems to be a factor. This is evident when
one sees that not only the development end of LSI is under fire but the sales
end as well.
The practice on the sales f ront of holding honeycomb structured target ful-
fillment conferences and pep rallys which include the agencies is one which
all the semiconductor makers have adopted since last fall.
Aim at OA
The aim here is to attack a market such as that of OA equipment which seems
destined for great growth, but the companies are nut forgetting that robots,
tool machines, and amusement equipment are areas where utilization of semi-
conductors is expected to increase. Where sales of LSI are concerned, there
are plans looking 2-3 years ahead to enter the home automation market;
l~omeowners and home builders will be the targets of this move, and the
respective market battl~es are developing.
Savings on New Market De~~elopment
When one analyzes the situation of better opportunity the more depressed the
situation, one f inds that a period when there is not too much activity such
as the present is a good t:ime to develop new markets. This is the time in
which the markets one has in mind but usually does not have the ti.me to
develop can be attacked, as seen in many examples to date.
The semiconductor industry often has been described as "an area of fierce
competition of a varied nature," in that the main market is constantly a
scene of fierce conflicts centered on the large makers. The markets for port-
aUle calculators, watches, VTR, television, and automobiles are said to be
areas where one cannot relax for a moment. It seems certain that the OA equip-
ment market will be where maximum confrontation will take place, but even when
the market scale is small, the development of new markets is what will deter-
mine the future standings of the various makers.
How To Avoid Overseas Friction
"Won't this fierce competition be settled one way or the other?" is a state-
ment often made in regard to the intensity of the rival efforts of the
Japanese semiconductor makers. It is said that if one can survive in the
domestic semiconductor war, he will have no trouble in the world market.
- Tl~c~ reason the competition is so fierce is that the Japanese semiconductor
m:ikers are all headed in the same direction, and the products also are in
exactly the same area.
'faking tl~e 64 K RAM as example, ttiere are six large makers in Japan--Hitachi
I.imited, Fujitsu, Nippon Electric, Mitsubishi Electric, Oki Electric, and
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Sharp. Five companies--Motorola, Texas Instruments, Mostec, Fairchild, and
Intel--are the corresponding American makers.
As has often been said in the past, American companies are quick to retreat,
while such behavior on the part of Japanese companies is essentially nil. The
Japanese companies are still for the mast part producing old-type memory even
though the price has dropped. "'his is one of their services to their users,
although it has been said that the situation in Japan is one of too highly
competitive a nature.
There seems to be no countermeasures or solution to this situation. Every
maker has the attitude that this competition will not go away as long as semi-
conductors are undergoing development. If thin~s continue in the present way,
then the Japanes:: will eventually be supplying more than half of the world's
need for semiconductors just as in ather electronic parts (such as Braun
tubes, resistors, condensers, and coils). This will be the result of the
fierce domestic competition and the reward for each company's efforts, but
this is not a situation which may be appreciated by foreign countries.
It may be said that the industry hopes that further escalatiou in domestic
competition can be arrested and useless mistakes in production can be avoided.
American Criticism of Japanese 64 K RAM
Events Since February
Ever since February of this year, criticism by the Americans of the export of
64 K RAM by Japan has erupted in a tirade. The Japanese are on the alert for
future moves.
The critical attack by the Americans on Japanese IC exports surfaced in 1977,
and the problem has smoldered since then. On the other hand, since February
of this year, in addition to the complaints of the industrial group which was
directly carrying on this fight (the SIA = American Semiconductor Industry
Organization) and part ~f the American semiconductor makers, the U.S.Govern-
ment (in particular, the Department of Commerce) and members of Congress,
have 3oined the ranks of the criticizers, and there is deepening feeling that
the American side hopes to make this an administrative issue.
The principal events in regard to the American moves are listed below:
1 February: SIA representatives met with deputy trade representive MacDonald
in Washington and asked for government intervention to cope wi~th the Japanese
export of 64 K RAM. The New York TIMES carried the following article.
"Japan Controls 70 Percent
"Only 3 years ago, the United States was leading in the production of chips.
However, this situation no lunger exists. Japanese makers such as Hitachi,
Toshiba, Fujitsu, and Nippon Electric have invested huge sinns in production
facilities, which, together with government-financed research and development,
short-term amortization, and domestic market protection, enabled thes~
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cc~mpani.es to ct~