The Pacific : Japanese Doubt They Can Meet Trade Goals : * Commerce: U.S. semiconductor industry members are told it will be difficult to increase their access to Japan’s market.
Considering the backdrop of tense relations between the United States and Japan, members of the Electronic Industries Assn. of Japan could not have expected a warm reception for the message they delivered to their American counterparts in Honolulu last week.
With a huge trade deficit looming and the harsh criticism of American workers by some Japanese leaders still ringing in their ears, members of the San Jose-based Semiconductor Industry Assn. were told that it would be difficult for Japan to meet goals of agreements to increase access to the Japanese market for foreign semiconductor firms.
The Americans refused to accept the Japanese explanation that they may not be able to meet those targets for economic reasons, but agreed to continue talks with the Japanese.
These talks could be a harbinger of things to come in other market access negotiations between the United States and Japan.
If U.S. semiconductor industry representatives do not accept “economic downturn” arguments--but fail to find ways to gain greater access to the Japanese markets--economic relations could erode further. There are also wider ramifications. For example, Japanese automotive firms may eventually argue that they cannot afford negotiated targets designed to give American firms more access to Japanese markets for automobile parts.
The following is a summary of the market access goals for the semiconductor industry and the possible obstacles to meeting those targets.
Goal: Under pacts reached by Japanese and U.S. government negotiators in 1986 and 1991, the Japanese electronics industry agreed to try to provide American and other foreign semiconductor companies with access to more than 20% of Japan’s lucrative chip market by the end of 1992. U.S. semiconductor companies now have about 13% of the Japanese market, and other non-Japanese firms have an additional 1% of that business. (In contrast, Japanese companies have 20% of the American semiconductor market and other non-American firms have an additional 10% of that U.S. business.)
If foreign firms are to obtain more than 20% of Japan’s market by the end of this year, Japanese corporate users of semiconductors--companies that use those chips to manufacture goods such as computers and consumer electronics--will have to quickly begin to buy much more from foreigners.
Potential obstacles: Representatives of Japan’s electronic industries said it will be difficult to reach the 20% target in the current economic environment. Some of the biggest Japanese users of microchips produce their own chips and would have to expand their foreign supplier base to help reach that target.
However, stagnant worldwide demand forced two of Japan’s biggest makers of microchips and computers to announce last week that they will slash profit forecasts, and rival Japanese companies are saying that they may follow suit.
Fujitsu Ltd., Japan’s biggest computer maker, said it is cutting its profit forecast for the fiscal year, which ends in March, to $472 million from $787 million. That compares with profit of $1.17 billion the previous year.
NEC Corp., a computer and microchip giant, said it is cutting its pretax profit forecast to $511 million from an anticipated $944 million. In contrast, the company had a profit of $1.05 billion in 1990-91.
Other major Japanese electronics firms--Toshiba Corp. and Mitsubishi Electric Corp., for example--have said they may also have to revise their profit forecasts.
However, representatives of the U.S. semiconductor industry responded by noting that the Japanese electronics industry has not significantly expanded their foreign semiconductor supplier base during periods of economic growth and prosperity. American negotiators say their Japanese counterparts have argued that sales weren’t expanding rapidly enough during the “good times” to accommodate a big surge in foreign sales in Japan.
In fact, American negotiators argue that it should be easier for many Japanese firms to purchase more foreign chips during a economic downturn because companies typically carry out restructuring plans during times of economic distress.
Representatives of the two industries will meet twice more this year. The Japanese government and the Bush Administration are hoping for progress. If the talks fail, the two governments may be asked to intervene more directly--a situation both administrations would like to avoid.
* NEWS ANALYSIS
