Possible Sale of Chip Firm Stirs High-Tech Policy Debate


The potential sale of a key American electronics operation to a Japanese competitor is sparking renewed debate over whether the United States needs a policy to protect and nurture critical technologies.

A report that Perkin-Elmer Corp.'s semiconductor manufacturing equipment division might be acquired by Japanese rival Nikon Corp. also raises new questions as to whether American business is too shortsighted to invest in firms offering a lot of promise but only slim immediate profits.

A sale of the division to Nikon, an event widely speculated upon by industry insiders, will come only because a willing U.S. buyer couldn't be found, analysts said. The big negative: the division's lackluster profits.

To be sure, this wouldn't put an end to the American presence in semiconductor manufacturing equipment. Perkin-Elmer ranks only fifth among U.S. makers of such machinery, behind Applied Materials in Santa Clara, General Signal of Stamford, Conn., Varian Associates in Palo Alto and Eaton Corp. in Cleveland.

Still, the loss of the Perkin-Elmer unit to the Japanese would be significant because the firm has some important technologies that other U.S. companies lack. And while the division is not very profitable now, it could be in the future, analysts said.

"Clearly the Japanese value technology more than we do in the U.S. That's the heart of the issue," says Dan Hitchinson, president of VSLI Research, a San Jose market analysis company. "The Japanese view technology as a source of future wealth, and clearly we do not."

When Norwalk, Conn.-based Perkin-Elmer announced that it wanted to sell its semiconductor equipment unit last April, its stock shot up $2.25 per share. On Monday, following news of the potential Nikon deal, the stock jumped $1.125 to close at $23.375 in New York Stock Exchange trading.

Although neither company will discuss the possible deal, analysts said industry insiders have known for months that Nikon was extremely interested in buying the last of three divisions Perkin-Elmer put on the auction block.

The lure to Nikon, the well-known Japanese camera maker that has quietly and steadily become the world's No. 1 maker of semiconductor manufacturing equipment, is not size or immediate profits. The Perkin-Elmer unit, once the world's top semiconductor manufacturing equipment maker, had pretax earnings of just $3.2 million on sales of $200 million in its 1988 fiscal year, a small fraction of Nikon' sales of $1.9 billion last year.

Instead, the attraction is Perkin-Elmer's advanced technology for etching patterns of computer chips on silicon wafers. Perkin-Elmer is one of the few companies in the world to make machinery that photographically reproduces circuit patterns--whose lines are less than one-tenth the width of a strand of hair--on the wafers.

Canon, the other Japanese camera giant that has become a force in semiconductor manufacturing equipment, has the technology. Nikon is said to want it to protect its market dominance.

But industry analysts and others argue that if the Japanese control the market for machines that make semiconductors, just as they do the actual semiconductor market, they will have an even greater lock on the overall market for high-technology products.

"If you own the technology, you have a 4- to 5-year head start on knowing how to apply that technology," VSLI Research's Hutchinson said. "You know what products are possible."

Perkin-Elmer officials--including Chairman Horace G. McDonnell, a former president of the American Electronics Assn.--had repeatedly said they prefer to sell the unit to a U.S. company to keep its technology in domestic ownership. And, according to analysts, several domestic concerns expressed interest.

However, analysts said, the potential U.S. buyers concluded--just as Perkin-Elmer did months before--that they couldn't make enough money operating the unit.

The pullout of potential U.S. buyers left Nikon the sole bidder, and because Perkin-Elmer is trying to complete the deal before year-end, analysts said Nikon appears to have won what it wanted.

Even if a deal is reached between the two companies, it could be subject to review by the Committee on Foreign Investment in the United States, a 14-year-old federal agency whose powers have recently been expanded and strengthened.

The agency can study the proposed sale for up to 75 days and send it to President Bush for his personal approval.

A spokesman for Sematech, the consortium formed to bolster the semiconductor industry, said the group opposes the potential deal with Nikon, but will not formally challenge it.

"This is a development we deplore. It bodes ill for the future of the country," says a spokesman for the consortium. "If we don't start preserving our manufacturing and materials industry immediately, they'll be nothing left."

International Business Machines Corp., the world's leading chip maker, also said Monday it hopes American investors will keep the division under U.S. control.

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