That IBM Chip Deal Could Be a Page Out of Clinton’s Book
There are reflections of the economic policies favored by Democratic presidential candidate Bill Clinton in the newly announced research collaboration among IBM, Toshiba of Japan and Siemens of Germany.
But to understand that, you have to get past suggestions that the peaceable kingdom is at hand, with lions lying down with lambs, just because semiconductor and computer companies are making deals across borders and oceans.
Pros in the electronics industry laughed knowingly at the news that IBM, Toshiba and Siemens would pursue joint research on a 256-million-bit memory chip, and that Fujitsu of Japan and Advanced Micro Devices of Sunnyvale would also collaborate on research.
“Alliances never produce anything great,” one expert said. “It’s the weak leaning on the weak,” said another, suggesting that several of the joint venture participants are lagging in the semiconductor business and that all of them may be pursuing an unfruitful, overly expensive technology.
In short, the proposed deals are not too thrilling in business terms. That’s useful information for investors who might be inclined to rush out and buy stock on the promise of global ventures.
But the news is more interesting in what it reveals about U.S. and world industry and in its confirmation of the ideas of Robert B. Reich--architect of the economic plan that Clinton will refer to in his acceptance speech Thursday.
Clinton’s will be a policy of helping industry indirectly, emphasizing college loans, research grants and aid to education. And though the Arkansas governor won’t say so specifically, it will be a distinctly anti-protectionist policy, echoing Reich’s belief that “the important question is not which nation’s citizens own what, but which nation’s citizens learn how to do what, so they are capable of adding more value to the world economy.”
The line is from a 1991 book, “The Work of Nations,” in which Reich, an economist at Harvard, explained that the worldwide investments and operations of multinational companies are now determined by business considerations, not those of national allegiance.
And the same is becoming true of individual investments, wrote Reich: “Savings slosh across national boundaries in search of the highest returns.”
That being the case, he concluded, it is now more important for a country to attract investment from global markets than to protect local industry. “There is a growing connection between the amount and kind of investment the public sector undertakes and the capacity of the nation to attract worldwide capital,” Reich wrote.
“Herein lies the new logic of economic nationalism: The skills of a nation’s work force and the quality of its infrastructure are what make it unique and attractive in the world economy.”
That language is reflected in Clinton’s national economic plan: “In the emerging global economy everything is mobile: capital, factories, even entire industries.
“The only resource that’s really rooted in a nation--and the ultimate source of all its wealth--is its people,” says the Clinton plan. “The only way America can compete and win in the 21st Century is to have the best educated, best trained work force in the world, linked together by transportation and communication networks second to none.”
It is the kind of economic policy that believes the most important fact about the semiconductor research venture is that the work will be done at IBM’s facility in East Fishkill, N.Y., thus giving Americans work on advanced technology.
It’s the kind of policy that favors a national fiber-optic computer network--a pet project of vice presidential candidate Sen. Al Gore--and one that would favor a Toyota investment in Kentucky over protecting Chrysler.
Whatever its faults, the Reich-Clinton policy recognizes that national champions don’t succeed in global industry. Europe has tried for decades to come up with a high-tech winner, and succeeded only in piling up great losses for Philips of Holland and several French and British companies. The German giant Siemens, entering joint ventures with IBM, has been distancing itself from Europe’s thinking.
Any economic policy must be flexible, because competition moves too fast. Japan’s companies spent $4 billion a decade ago to capture dominance in memory chips--the most widely used type of semiconductor. Yet Japan’s leadership is slipping today as Korean companies such as Samsung move aggressively, as U.S. companies such as Micron Technology and Texas Instruments compete successfully and as technology changes.
“In the new flash memories, the leaders are Intel and Advanced Micro Devices,” observes Rajiv Chaudhri, vice president and electronics analyst at Goldman Sachs.
The ambitious venture to develop a chip with 256 million bits of information--the equivalent of five King James Bibles--is another example of changing patterns. “The technology for making such a chip doesn’t exist,” notes Stanford Prof. John Wharton, a computer design consultant.
Japanese companies used to develop such basic technology in collaborations sponsored by the famed Ministry of International Trade and Industry. But now Toshiba is coming to IBM.
Truth is, an economic policy that indirectly helps business may be just the thing for a U.S. semiconductor industry that’s doing pretty well on its own.
Which makes you think about all the lamentations of recent years about U.S. industry’s dereliction and decline in semiconductors. One reason for such poor-mouthing may be that we are moving nervously into a new industrial world.
So, like John McEnroe or Monica Seles on a tennis court, we growl and grunt to psyche ourselves up for the challenge.
