AT&T;, Japan’s NEC to Jointly Develop Semiconductors
American Telephone & Telegraph and NEC Corp., the huge Japanese electronics maker, on Wednesday unveiled plans to jointly develop and sell a wide range of semiconductors worldwide. The deal mirrors recent efforts by other U.S. and Japanese microchip companies to share technology and reduce trade frictions between their two nations.
The proposed five-year deal between AT&T; Microelectronics, a unit of AT&T;, and NEC covers three areas: cooperation in developing semi-custom microchips, cooperative manufacturing of certain chips and, perhaps most important, more aggressive efforts by NEC to use AT&T; chips in its computer systems. NEC is one of the world’s largest chip makers while AT&T; is a leader in specialized chip technology.
The deal, whose value was not given, is expected to be signed next month.
“The agreement will benefit the customers of both companies through strengthening product lines and technical capabilities,” William Warwick, president of AT&T; Microelectronics, told reporters in Tokyo.
Analysts agreed and predicted that similar deals would follow because they benefit the companies involved as well as help soothe U.S. electronics makers who claim that the Japanese make it too difficult for U.S. companies to sell products there.
“(The deal) looks good for both of them,” said Tom Murtha, an analyst at Baring Securities Japan Ltd. “The tie-up will transfer technology both ways and help drown the flames of trade friction.”
Lack of access to the Japanese market has been a chief complaint of U.S. business and political leaders. The Bush Administration has said it wants U.S. penetration of the Japanese chip market to reach 20% before the mid-1991 expiration of the Japan-U.S. semiconductor pact signed in 1986. According to a Japanese study released late last year, the share of the Japanese market supplied by foreign manufacturers jumped to 12.9% last year from 8.6% in 1986.
With the expiration of the trade agreement looming, there has been a recent spate of agreements.
The AT&T-NEC; deal is one of nearly a half-dozen in the last two years between large U.S. and Japanese semiconductor makers. Others included Intel’s agreement to sell memory chips made by NMB Semiconductor, a memory chip licensing pact between Motorola and Toshiba and deals by Hitachi with both Texas Instruments and VLSI.
Although these agreements have been heralded as important steps, at least one semiconductor industry leader cautioned that they are not the same as guaranteed equal access for U.S. products to the Japanese market.
“These agreements are all between very large companies and to the extent that they help our efforts, that’s fine,” said Andrew Procasini, executive director of the Semiconductor Industry Assn. in Santa Clara. “But these are not a major factor in our efforts to open the markets in Japan . . . We are still actively engaged in an effort to open the Japanese markets to all U.S. semiconductor makers, large and small.”
However, a primary focus of these efforts has been to persuade Japanese electronics makers to use U.S. components specially designed for their products, a process known in the trade as “designed-in” components. And to the extent that the AT&T; deal includes a provision for the “design in” of AT&T; semiconductors for a variety of NEC products, including communication systems and computers, this agreement stands out.
“The design-in provision is important,” assured David Angel, an analyst with Dataquest, a Silicon Valley high technology market research firm.
The deal also calls for AT&T; Microelectronics to receive a license to market, design and produce NEC’s advanced gate array computer chips, used widely in computers and other electronics devices. In return, NEC will receive AT&T;’s most sophisticated computer-aided tools used to design computer chips, Warwick said.
In addition, AT&T; Microelectronics will help manufacture certain NEC chips widely used in consumer electronics products.
“This will allow Japanese customers to obtain products made by an American firm and will give AT&T; a greater presence in the Japanese market, especially with consumer electronics companies,” Warwick said.
