NEWS ANALYSIS : Chip Firms’ Japan Gains Are a Coup : Technology: U.S. companies’ market share rose during hard times. The question is: Can the progress continue?
American semiconductor manufacturers are cheering recently released figures showing a 1.4-percentage-point gain in market share in Japan during the second quarter--a remarkable achievement given that Japan’s economy went into a slump during that period.
Winning a 16% market share in Japan after virtually no improvement since 1990 is significant for the U.S. chip industry.
The Semiconductor Industry Assn. of America said the gain in the quarter ended June 30 represents an estimated 1,400 additional jobs for Americans. And an increased share of Japan’s domestic chip market, the world’s largest, is helping the U.S. industry challenge Japan again in global markets.
But can American companies keep up the pace? Analysts say a major factor in the improvement this year was Japanese fear that political rhetoric during the U.S. presidential campaign might produce a backlash against Japanese exports to America. With the campaign nearly over, other factors, including Japan’s continuing economic slump, may mitigate those concerns.
During past economic downturns, Japanese companies cut back purchases from foreign suppliers and turned instead to the traditional Japanese suppliers they felt most comfortable with.
When the same thing appeared to be happening in November and December of 1991, the SIA persuaded Washington to put heat on Japan to keep moving toward the 20% goal of a 1986 agreement aimed at boosting the foreign share of its chip market.
Between 1990 and March of 1992, foreign firms’ share of the Japanese chip market grew from 13.2% to just 14.6%. In the last six months of that period, market share hardly budged. In March, the SIA released a survey showing that 73% of Americans backed economic sanctions against countries that do not open their markets to U.S. goods.
U.S. Trade Representative Carla Anderson Hills endorsed the SIA view by noting that “the stagnation in foreign market share is a serious concern.” She said it was “critical” for Japan to intensify its efforts.
In April, ranking members of the U.S. Senate began demanding that Hills report on what the Bush Administration was doing to make sure Japan was abiding by the chip agreement.
“There was a change in attitude; they stopped turning inward,” says Roger Mathus, head of the SIA’s Tokyo office.
Although Japanese officials denounced the American pressure and contended that the market share numbers in the chip agreement were a goal rather than a guarantee, the Ministry of International Trade and Industry stepped up pressure on Japanese firms to buy more chips.
Since March, however, Japanese companies have shown increasing concern about the domestic economy. The continuing sluggishness could make it more difficult for ailing Japanese companies to keep buying foreign chips rather than domestic products.
A turnaround in Japan could also work against American firms. The U.S. industry’s strength is in sales of chips used in personal computers. Japan’s strength is in chips for consumer electronics.
Any pickup in Japanese consumer electronics sales, which have been weak because of economic problems both in Japan and the United States, would mean more purchases of chips from Japanese companies and could quickly result in a plunge in American market share.
Both sides are waiting to see if sales will increase as a result of emergency measures Japan agreed to in June to achieve the 20% goal by the end of this year. Under those measures, Japan’s major chip makers have mailed to 440 foreign chip suppliers lists of the kinds of chips they are interested in buying.
“The substantial increase in market share during a severe economic recession is a clear and positive example of the dramatic effects that can result from sincere and heroic collaborative efforts of the U.S. and Japanese semiconductor industries,” Nobuo Kanoi, deputy president of Sony Corp. and chairman of a Japanese semiconductor users group, said recently.
Kanoi attacked SIA lobbying efforts in Washington as counterproductive, rejecting the notion that such activities help U.S. chip makers sell in Japan. “The real important thing is for users and suppliers to cooperate to develop a close relationship,” he said.
Few observers believe that American companies will reach the 20% goal by the end of 1992. American executives in Tokyo say steady political pressure remains necessary to keep Japan moving toward that goal.
