ITC Finds That Japan Chips Damaging U.S. Semiconductor Firms
The high-technology trade dispute with Japan widened Friday when a federal agency, acting on a dumping complaint by a maverick semiconductor firm from Boise, Ida., said there is reason to believe that Japanese chips are injuring the U.S. semiconductor industry.
The 5-0 ruling by the International Trade Commission begins a process that could lead to stiff U.S. tariffs on semiconductors from Japan known in the trade as 64K DRAMs, a category of chips whose prices have tumbled dramatically over the last several months.
Micron Technology, an aggressive young firm whose own sharp price cuts last year angered other domestic semiconductor companies, charged in its complaint, filed in June, that chips now priced at about 75 cents apiece cost the Japanese about $1.25 to make.
Selling them at below-cost prices could constitute “dumping,” a violation of trade law. Any dumping tariffs would be designed to force market prices up high enough to give the Japanese manufacturers an 8% profit margin. Micron Technology says that would require a price of about $1.36.
It is the first official dumping complaint brought by a U.S. semiconductor maker but not the first time the issue has been raised. Informal dumping allegations against Japan were contained in a petition filed in June by the Semiconductor Industry Assn. with the U.S. trade representative’s office. That action demands fair access to Japan’s semiconductor market.
Week of Developments
The trade commission’s vote came at the end of a week that began with another report of a record U.S. trade deficit, followed by a Japanese government pledge of 87 reforms to open its markets to foreign goods. Hitachi, the Japanese industrial conglomerate, announced that it will step up U.S. purchases and build another factory in this country. And the Japanese government said it will grant IBM, the world leader in computers, access to certain computer patents that it owns.
The dumping case now goes to the Commerce Department for an investigation and hearings. A final resolution of the case could take nine months.
However, ITC Chairwoman Paula Stern said that Micron’s complaint contains “inconsistencies” and suggested that it will be difficult to document dumping when a given chip passes through as many as nine nations in the manufacturing process.
The 64K memory chip, a semiconductor that stores about 64,000 bits of information, is the product with which Japanese chip manufacturers made their mark in the late 1970s by beating American firms to the market. It became the workhorse of computer memories and remains a high-volume, but not state-of-the-art, component. (A typical personal computer with 256 kilobytes of random access memory requires 36 such chips.)
As recently as early 1984, that size of DRAM, or dynamic random access memory, chip sold for an average of $3.50 apiece, says the market research firm Dataquest of San Jose. Last September, Micron Technology sought to win long-term contracts and grab market share by slashing prices from the street price of about $3.15 to $1.95 per chip--a tactic some have long associated with Japanese manufacturers.
Slack Demand, Excess Capacity
After that, prices began tumbling as Japanese manufacturers allegedly flooded the market even as demand slowed. By last spring, some 64K DRAMs could be had for as little as 40 cents apiece, Micron said in its complaint.
“What happened last fall was a legitimate price reduction,” said Larry Grant, Micron general counsel. “At those prices, everyone in the world should have been making money. At today’s prices, nobody is.”
However, Dataquest analyst Lane Mason said slack demand and excess capacity had much to do with the collapse of prices, regardless of what pricing strategies the Japanese might have carried out.
“The percentage decline in prices was the most precipitous in the history of the industry,” Mason said. “But the supply excess was also the most significant we’ve seen, and demand dried up more than ever.”
There was no official comment from Japanese manufacturers, who in the past have denied selling below cost. An executive at one of the firms said: “If the final decision is against us, it will be a political decision. Once you get past the anti-Japanese rhetoric, you’ll find there’s no case.”
An internal memo from Hitachi that was widely publicized in May instructed dealers to undercut competitors’ prices at all costs, but Hitachi disavowed the document as that of an overzealous sales manager. Other marketers of Japanese semiconductors here include Fujitsu, Mitsubishi, Matsushita, NEC, Toshiba and Oki.
The 64K memory device is Micron Technology’s main product, and the company blamed the plummeting prices for a $5.75-million loss in the quarter ended May 28.
The company has prided itself on its virtually all-American operation, in contrast to many larger U.S. semiconductor firms that do much of their manufacturing offshore.
