U.S. Asks Japan to Deny Aid to Chip Makers

Times Staff Writer

The United States has asked the Japanese government, without success, to declare publicly that it will no longer rescue firms or industries in which bad management decisions have led to over-investment, a U.S. official said here Thursday.

The American official, who asked not to be identified by name, said the request was made in the hope of warning Japanese semiconductor makers to stop what the United States regards as excessive investment at a time of diminishing growth in the demand for chips.

He said the United States wants Japan to adopt a hands-off policy toward all industries that get themselves in trouble, ending what Americans believe to be a consistent pattern of government aid to industries that have over-invested through such devices as “depression cartels” and generous tax write-offs.

“I can’t say they gave a ringing endorsement to our proposal,” the official said.


Japanese semiconductor makers, he charged, doubled their investments in manufacturing equipment last year, to $3.2 billion, and are expected to invest $4 billion this year.

Toshio Takai, president of the Electronics Industries Assn. of Japan, said at a separate news conference that the Japanese industry plans to invest $2.4 billion in new semiconductor facilities this year, or 15% less than last year’s investment. Both Takai and the association’s chairman, Akio Morita, who is chairman of Sony, denied that the Japanese semiconductor industry is over-investing or dumping products in the U.S. market.

The U.S. official, who talked with reporters about discussions here this week by a team of American negotiators headed by Michael Smith, deputy U.S. trade representative, said the Trade Representative’s Office will decide within two weeks whether to accept a petition filed last Friday by the U.S. Semiconductor Industry Assn. asking for retaliation against what it said are unfair trade practices by Japan.

If the petition is accepted, the allegations will be investigated.


But, even before the petition was filed, U.S. officials had asked Japan to explain why American semiconductor makers’ sales in Japan never rise above 10% of the market, while in Europe, where American and Japanese chip makers compete side by side, American firms control half of the market, he said.

“We haven’t gotten an answer to that question,” the official said.

Morita said American sales of semiconductors in Japan account for 19% of the market if the sales of American firms based in Japan and other Asian countries are included.

The U.S. official said the Reagan Administration has warned Japan that increases in Japanese semiconductor investment have outstripped the growth in demand for chips, which has recently diminished, raising a suspicion that Japanese firms are selling their products in the United States at prices below production costs.


The official characterized this week’s discussions as “a very frustrating experience.”

“There are a lot of issues still on the table,” he said. “We keep having these issues come up, and we don’t seem to be getting them resolved fast enough or resolved at all. We haven’t made the progress we hoped for.”

Although new private firms entering the telecommunications field are expected to receive approval today to buy foreign-made satellites, the recently privatized Nippon Telegraph & Telephone still has not been given authority to do so, the official complained.