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SAFI QURESHEY AND JOHN FLUKE : The Broader Picture on HDTV : Other Industries to Feel Impact of This New Technology

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Times staff writer

The international race to develop high-definition television has prompted dire warnings about the potential loss of American jobs, technological competitiveness and economic clout if the United States doesn’t rise to the challenge.

Experts agree that Japan holds a clear lead in development of the televisions of the future, which will have much brighter, sharper picture screens. American industry and government have argued that if the United States loses this race, the domestic electronics industry runs the risk of becoming an also-ran.

The American Electronics Assn., a Silicon Valley trade group, says America’s share of the personal computer market will shrink drastically if the Japanese or Europeans take the lead in HDTV development. Because advanced computer chips are at the heart of HDTV technology, nations that develop these chips will also gain an advantage in other electronics markets.

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According to AEA estimates, U.S. companies now hold about 70% of the worldwide PC market. American firms will be able to retain that share of the PC market if U.S. industry captures about 50% of the HDTV market, the association says. But if U.S. firms have only 10% or less of the HDTV field, the PC market share would sink to 35%.

Orange County firms have little involvement in HDTV at this time. One company, Anaheim-based Interstate Electronics, hopes to obtain a government research grant for liquid crystal display technology that may be used in the new television technology.

The HDTV debate, as well as the general issue of U.S. industrial competitiveness, was the topic of a recent interview by Times staff writer David Olmos and electronics industry executives Safi Qureshey and John Fluke.

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Qureshey is co-chairman and president of Irvine-based AST Research Inc., one of the leading U.S. manufacturers of IBM-compatible personal computers. Fluke is chairman of John Fluke Manufacturing Co., an Everett, Wash., defense and commercial electronics company. Fluke’s firm is a part owner of Computer Systems Approach, a Fullerton software development firm. Fluke is a member of the national board of the American Electronics Assn. and chairman of the trade group’s Science and Technology Operating Committee.

Q. There have been a lot of warnings about the potential loss of American jobs and our technological competitiveness and economic clout if U.S. industry loses the HDTV race. Do you agree with those warnings and why?

A. Fluke: The argument begins with a variety of estimates you hear about the potential size of the HDTV market in the United States. The estimates are that HDTV will be a total market of $100 billion during the first five years after its introduction. In comparison, the market for VCRs today, most of which come from Japan or elsewhere in the Far East, runs about $20 billion a year. And that’s about $7 billion more than Boeing’s sales of commercial transport aircraft. The entire worldwide electronics market was about $250 billion to $300 billion in 1988, so HDTV could represent a 10% annual growth in the total electronics market. So, is this an important thing to worry about? Yes, it is.

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Q. Can you be more specific about how this could result in a loss of jobs and lowered technical competitiveness?

A. Fluke: If these television sets are sourced from Asian countries, the U.S. suppliers of mechanical housing components, electronic components, display components, clearly will not be playing in this new field of consumer electronics. It’s not so much that there will be any particular loss of jobs, because we have very few jobs in the consumer electronics field to begin with. It is the issue of whether or not we can maintain the level of jobs we presently have. So, it does not mean a catastrophic ending to the electronics industry in the United States, but it’s one of those opportunities that we ought to think twice about before we decide we can’t play.

Q. Is it more a missed opportunity for potential growth?

A. Qureshey: I think I would agree with that. As I travel around the world, I realize that a more troubling issue is the question of how America is perceived. . . . You’re really bothered when you travel and see more foreign or Japanese names on products. And when you hear more people who just give up and say America cannot compete. And when you see the arrogance in Japan, which would seem to want us to just grow oranges and produce beef. I think HDTV is potentially a new opportunity and one in which we should make an effort to compete. Nobody can predict how well we will do. But we should make an attempt to regain the confidence of this country, because I think we are all beating ourselves and kind of accepting defeat. It’s a question of perception and how we look at ourselves as a nation, both domestically and in our dealings with other countries in trade negotiations and other issues. I believe that the situation will get worse before it gets better.

Q. Steve Jobs, the founder of Apple Computer, has been quoted as saying that American industry has already lost the battle for HDTV. Do you agree with that statement?

A. Qureshey: The Japanese are still way ahead. I think we’re trying to make a stand, and we’re trying to at least get some discussion going in this country. Again, we cannot guarantee success. It seems to me that the most important thing for us to do is to get started. On the other hand, Steve Jobs may be right.

Q. As American industry gets into the race to develop HDTV, what do you think are the important issues that will emerge?

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A. Fluke: I think establishing a set of industry design standards early on is important. We need to make sure that the standards will allow the development of equipment that consumers can buy in the first round of HDTV and still be able to use 10 or 20 years later. We can’t subject the consumer over the next 10 years to two full generations of this stuff. That throws away way too much American personal income. We ought to define a standard that will have a good, long lifetime. You do that with an industrywide effort, and having done that, you then open the floodgates to competitors. If the American players aren’t aggressive enough to pursue it, then we’ll get what we deserve, which is that the Japanese will supply the equipment.

Q. Is there much at stake for the Orange County economy in the HDTV competition?

A. Fluke: A major piece of the local economy here depends heavily on the electronics industry. It’s crucial that we engage in businesses that allow us to export a lot of products out of this country. The HDTV debate is a message to the companies around here that they have got to properly prepare their products for those export markets. But it is also, I think, a mandate for all of us to get at public policy formation process, both at the state level and particularly at the federal level. How will this all look 10 years hence, as we examine it in hindsight? What will we have wished we had done? Let’s try to imagine that now, and set in motion a series of steps that will maybe make it so we don’t need to lose this battle.

Q. How will electronics companies in Orange County and elsewhere be affected by the HDTV race in the short run?

A. Fluke: People (who) are involved in the personal computer business, such as AST or Western Digital, and dozens of other companies that are not related to electronics, will not necessarily be adversely impacted in any short-term way if we don’t win this battle. But, they’ll obviously be denied any benefits if we don’t win. I have to argue that it’s worth everybody’s trouble to become informed on this issue, to understand the complexities of it.

Q. Of course, the HDTV situation is just one part of the larger debate over international competitiveness and international trade. There’s been a lot of talk recently about ways in which the United States can put pressure on its trading partners to open up their markets and stop engaging in what the Bush Administration deems unfair trading practices. What do you think of such actions?

A. Fluke: U.S. electronics companies buy a lot of stuff offshore, and we sell a lot of stuff offshore, so it’s a two-way street. Erecting tariff barriers around our borders is a defensive tactic. All it’s going to do in the long run is put a bunch of U.S. suppliers to sleep and remove us from the forces of competition. And if we start losing muscle tone, that’s not healthy. Another example of what I think is basically a defensive tactic is pressuring Japan to open their markets to us. Certainly that pressure should be maintained. We ought to make them live up to their agreements. The Japanese have no reason to respect us, if, when we make an agreement with them, we fail to enforce both sides. And there should be sanctions brought if there’s a failure to do so. But that is still a defensive tactic, and can’t solve all our problems. When we try to sell our products in Brazil, China, Germany or England, we’re not going to be able to get those nations to pass trade laws that will give preferential treatment to U.S. products over Japanese products. So, we basically have got to be able to beat them somehow, and the question now is what sort of offensive tactics might we take. Now, there’s the prospect of retaliation on the part of our trading partners. We don’t want to get too carried away with this, so we need to be careful about the use of offensive tactics. They have to be rational and well-thought-out. We don’t want to get in a real economic war because that eventually can lead to real war.

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Q. A big concern for the U.S. electronics industry is Japanese domination of the semiconductor market. The Japanese virtually dominate the market for dynamic random access memory chips. How did the Japanese take control of the DRAM market?

A. Fluke: Well, one reason is Japanese companies are more willing to give up profits and have lower returns on their capital investments than what would be expected of a U.S. manufacturer. Japan’s objective was to win that market, and they did.

Q. Did American chip makers go to sleep and let the Japanese take that market, or what?

A. Fluke: The technology business is fraught with blind alleys and mistakes. Those companies that quickly respond to mistakes and move on successfully deserve the reward, and those that don’t deserve to die.

Q. Do you think they won the DRAM market and other markets fair and square?

A. Fluke: Yes, they won fair and square. We laid down in the street and let them drive cars back and forth over us a few times. We shouldn’t have done that. But we ought now to realize that that’s what’s going on. As long as we let them do that, they’ll keep doing that. If they know that you are a dummy, I guess you’re going to get taken advantage of.

Q. Has AST been able to sell any personal computers in Japan?

A. Qureshey: About six months ago we opened a small office in Tokyo, staffed by several people. We wanted to establish a presence, because we really see Japan as the second-largest computer market. We cannot ignore it. I think American companies are sometimes at fault for not trying to learn how to do business in foreign markets. We always have the same American equipment or brochures that we have here, the same take-it-or-leave-it approach. I think we have to change.

A. Fluke: The Japanese are different in their thinking than we are in many important areas. If you want their business, you better go figure out just exactly what it is that makes them go. And, by the way, they have the same weakness in some cases for foreign products as Americans do. For example, if you buy a Jaguar or BMW in Japan, it is a pretty high-powered, snooty thing to do.

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A. Qureshey: I think the challenge is really in the area of public policy. AST is becoming a little bit more active and more vocal, because for many years we just minded our business. I’m encouraging more people in our industry to get involved. We have to express our views. For years, we told ourselves that our companies were too small or the larger economic issues didn’t affect us.

Q. Is this need for increased awareness of policy issues part of becoming a more mature industry?

A. Qureshey: No, not just that. I think the stakes are so high. If the stakes were not so high, then you could ignore it. If Japan wanted to export us pet rocks, I wouldn’t care. You have to look at it what kind of quality of life we will have in the future.

A. Fluke: Estimates now have it that there are about 2.9 million people directly employed by the U.S. electronics industry, which makes the industry a larger employer than the automobile and steel industries put together. This has emerged as a very important employment sector. The application of electronics to non-electronic applications has grown exponentially. I think the 1990s will see things that we just never dreamed of.

A. Qureshey: The United States is going to have to set a strategy and enforce it. It’s time we take a stand, and we’d better take it before 1992. (In 1992, European nations will unify into a single economic market.) After 1992, there is going to be chaos as far as trying to sort out the markets. We have a chance of falling by the wayside over here.

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