U.S. Chip Makers Must Try Harder, Japanese Firms Say

Japan’s six largest computer chip companies are now buying more than 18% of their chips from abroad, but they say that foreign firms will have to try harder if they want to grab a bigger share of the market.

Company spokesmen say that if foreign firms are to achieve the 20% share of the total Japanese market that U.S. makers say they want by 1991, they have to supply the type of chips Japanese manufacturers need.

The 18% average for the 1988-89 financial year is up from about 15% two years ago. But efforts to keep or raise those levels could run into trouble, and boosting sales to smaller firms--essential if total foreign market share is to grow--will be tough, the spokesmen and government officials said.

“Our target is to maintain a 20% level of foreign purchases in 1991,” said a spokesman for NEC Corp., the world’s largest maker of silicon chips.

“But it’s going to be difficult,” he said.

NEC bought 20.8% of its chips from foreign firms in 1988-89, about the same level it was buying two years ago, the spokesman said. Most of these came from U.S. makers.

Supply Concerns Cited

But NEC could find it hard to maintain that level unless U.S. and other foreign makers start producing more of the chips that NEC needs, especially vital memory chips, he said.

Such concerns were echoed by other Japanese chip makers.

“Our target is to increase our foreign purchases bit by bit,” said a spokesman for Toshiba, which bought 16% of its microchips from foreign sources in 1988-89, compared to 12% in 1986-87.

“But we want chips for use in consumer electronics products, and the foreign makers supply few of them, so we have to buy them from Japan,” the Toshiba spokesman said.

“It’s a question of whether we can buy the chips we want, at the price we want, when we need them,” said a spokesman for Hitachi, which raised its foreign chip purchases to 15% in 1988-89 from about 8% in 1986-87.

U.S. government and industry officials have charged that Japan is not living up to a 1986 pact on semiconductor trade in which Tokyo pledged to boost foreign chip makers access to the Japanese market.

No market share figure was included in the agreement, but U.S. officials have said Japan committed itself to a 20% foreign share in a secret side-letter.

Japanese government and industry officials have repeatedly denied promising any specific market share.

Washington slapped 100% tariffs on $165 million worth of Japanese exports in 1987 because of Japan’s alleged failure to live up to the agreement.

But while foreign semiconductor purchases by Japan’s largest chip makers--also its biggest microchip users--are nearing the 20% level, raising the foreign share of Japan’s total market above its current 10.6% will be tough, officials on both sides agree.

What they disagree on is the reason for the uphill battle.

The U.S. industry sees Japanese companies’ attitudes as a major problem.

“The five largest (Japanese) users made efforts to improve their purchases of foreign semiconductors, but that change in practice has not percolated down to the rest of the structure,” David Metz, executive director of the SIA’s Japan office, told reporters last month.

“The prime barrier now is the attitude that grew up over a long period of time,” Metz said, noting that many smaller Japanese companies still believe foreign-made means poor quality, service and delivery.

Japanese makers and government officials see different obstacles to expanding foreign sales to smaller users.

“The Big Six make a lot of computers and other office and industrial use products, so it is easier for them to use foreign chips,” a Japanese trade official said.

“But Americans aren’t making consumer product-use chips, so the next level of users can’t get the chips they want. It’s a product mismatch,” the official said.

U.S. firms’ sales efforts have also been criticized by some Japanese makers.

“They’re not doing enough marketing to the small users,” said a Hitachi spokesman.