Chip Shortage Is Beginning to Ease
The severe shortage of computer memory chips that has suppressed sales in the entire computer industry for the last 18 months is slowly beginning to ease, but U.S. electronics makers remain worried about Japanese control of the critical components.
Memory chips are the building blocks of the worldwide electronics industry and are essential to products ranging from personal computers to copying machines. Over the last decade, Japanese companies have become the supplier of nearly 90% of the worldwide market for these tiny components.
When the supply crunch hit last year, U.S. electronics makers were left wringing their hands over lost sales, foregone profits, delayed product introductions and worsened relations with customers. In addition, the manufacturers painfully learned how dependent they had become on the Japanese and how vulnerable their sophisticated products can be to shortages in the mundane and basic components.
The upshot is a growing awareness of how the Japanese dominance in memory chips can give companies in that country a base to solidify control of the products that use those all-important chips.
“The Japanese have a large stake in supplanting (U.S.) merchant producers as the providers of leading-edge chip technologies,” said Michael G. Borrus, deputy director of the Berkeley Roundtable on the International Economy.
Manipulation Feared
If the Japanese companies succeed in gaining unquestioned leadership in chip technology, they will be able to reserve the latest chips for their own computers, phone switches, satellites and other equipment before making them available to U.S. and European rivals, Borrus said.
“At stake for the U.S. economy is not simply the $25-billion market for semiconductors, but the current ($500-billion) market for the final products that incorporate semiconductors, soon to be a $1-trillion market,” Borrus writes in a new book, “Competing for Control: America’s Stake in Microelectronics.”
However, so far the threat from Japan is more theoretical than real. For example, Toshiba, the world’s biggest producer of 1-megabit DRAMs (pronounced dee-rams), allocates more than 60% of its output of the chips to U.S. customers even though its own personal computer unit in Japan is short on them.
But the potential for manipulation is starkly obvious, especially considering that DRAMs can account for up to a quarter of the cost of building a computer.
Sun Microsystems Inc. is one firm that has felt the sting of the chip shortage. The booming Silicon Valley maker of computer work stations, which just cracked the $1-billion barrier in annual sales, says its revenue would have been $100 million higher if chip shortages had not delayed deliveries.
Although Japanese companies have scarcely touched Sun’s market, the U.S. company relies heavily for its chips on companies that are potential rivals.
