U.S. Warns of Retaliation Over Japan’s Chip Buying : Trade: It says the country’s semiconductor imports are still below an agreed-upon level.

U.S. trade officials said Tuesday that Japan was not keeping its pledge to buy more foreign semiconductors and raised the possibility of trade sanctions if purchases do not increase.

U.S. Trade Representative Carla Anderson Hills said Japan had not made sufficient progress on its August, 1991, agreement to boost government and business purchases of foreign computer chips to 20% of Japan’s needs by the end of 1992.

American semiconductor industry executives have been complaining since early this year that Japan was not living up to its commitments under the agreement. A spokesman for the Semiconductor Industry Assn., a trade group, said Tuesday that it is now “inevitable that the government will have to step in and take some kind of action.”

Hills has sent mixed signals over the last six months about how forcefully the Bush Administration is willing to push Japan on the chip deal. Her comments Tuesday escalated the rhetoric but left it unclear whether the Administration plans to retaliate.

Hills said a two-month review of Japanese purchases showed that foreign firms’ share had remained flat at 14.6% since the third quarter of last year.

“If substantial improvement is not achieved, we will take additional actions, as necessary, to fulfill the terms of the arrangement,” Hills said. “We fully expect our trading partners to honor their commitments.”

She did not say what the actions might be, but the U.S. industry has suggested sanctions on Japanese exports to the United States. Under similar circumstances in 1987, the United States imposed punitive tariffs on some Japanese electronics products. But American companies that buy chips then complained that the tariffs hurt their businesses.

In an effort to help boost Japanese consumption of foreign-made chips to the 20% target level, Japan’s NEC Corp. said Tuesday that it had set up an international purchasing office in San Jose.

Japan is the world’s biggest market for semiconductors, which are key memory and calculating devices for electronics products such as videocassette recorders, automobiles and computers.

Hills noted that U.S. and Japanese manufacturers agreed on a plan two months ago on how to increase foreign semiconductor use in Japan, but it is too early to judge results.

Hills added that “the Administration will work closely with the industry to monitor on an ongoing basis implementation of that agreement and other information on market access.” She said U.S. officials will review the situation regularly.