U.S. and Japan Start New Chip Negotiations

For years, Toyota Motor Co. disparaged foreign chip makers for their poor quality and relied on a small circle of Japanese suppliers for the bulk of its electronic components.

In 1989, the company changed its tune. Toyota’s purchases of American semiconductors next year will reach $35 million, up from just $5 million in 1989, the company says.

U.S. trade officials are convinced that the sudden change of heart was because of a 1986 agreement under which Japan agreed to help American manufacturers crack its tough domestic market. The U.S. share of the Japanese semiconductor market today is just under 14%, up from less than 10% in 1986.

So the U.S. semiconductor industry, now allied with computer companies, is pushing for a tough new agreement with Japan to replace the current one when it expires at the end of July.

Officials of Japan’s Ministry of International Trade and Industry, now in Washington negotiating the deal, are expected to go along with extending provisions in the agreement that call for stable prices and a mechanism to prevent Japanese makers from “dumping” when they have excess capacity. Dumping is selling below cost.

But MITI is expected to reflect Japanese industry opposition to the inclusion of market-share targets in the new agreement.

American semiconductor companies say an agreement without targets has no teeth.

If Americans are to compete with Japan on a global basis, they say, they must make greater inroads into Japan’s home market. But U.S. market share in Japan is still far below Japan’s 29% share of the American market. And the U.S. share in Japan is far below the 20% level American semiconductor makers say would indicate that Japan’s market is truly open.