One Race the U.S. Must Not Lose : Computer-chip technology: Betting on the future

Miracles of modern gadgetry--cellular phones, video recorders and computers, to name a few--owe their very existence to tiny chips packed with the power to execute a dizzying array of calculations. Today, in this arcane world of semiconductors, U.S. technology is at a crossroads.

After years of worrisome declines, U.S. companies appear to have stemmed the loss of market share in two important areas--chip manufacturing equipment and chip production. The leveling-off is a welcome sign, but it doesn’t mean that U.S. firms won’t remain engaged in an intense international competition.

The United States once reigned high and mighty, leading the world market in sales of computer chip-making equipment and of semiconductors. Japanese companies started nibbling away at their business, gaining dominance in the 1980s.

In 1991, reversing a 12-year decline, U.S. firms gained in worldwide sales of chip equipment, rising to 47.1% from 42.8% while the Japanese share fall slightly to 47%.

Chip-making gear is the crucial first link in the “food chain” of electronics. The manufacture of thousands of consumer electronics items and other equipment hangs on the availability of semiconductors.

The American gain has come despite a drop in the number of new chip-making factories started in 1991. As recently as 1980, U.S. firms had controlled as much as 75% of the chip equipment market.

Meanwhile, for the last two years the U.S. share of world chip production has held steady at just under 40%, a welcome sign of stability. The Japanese share has leveled off.

To some industry watchers, the United States is more competitive now. U.S. firms are considered to be best at producing the key chip-making equipment now in demand.

Part of the recovery is due to American chip makers’ resourceful focusing on production of high-profit, specialized chips while the Japanese produce memory chips. Who says American ingenuity is dead?