This state of affairs cuts across the spectrum of engineering disciplines to a lesser or greater extent. However, the shortage of skilled technical labor is particularly acute in the field of software engineering. In fact, the term "soft crisis" has been used to refer to the lack of adequate software engineering talent in Japan.1 Therefore, we will begin by examining the source of the labor shortage problem in software engineering fields, and explanations for the inability of Japanese educational institutions to respond to this problem.

In order to illustrate possible solutions to this "soft crisis", this paper will focus on a subfield of the software engineering industry known as integrated circuit computer-aided design (IC CAD).2 It is a field related to the design of complex ICs, and therefore it is a field of critical importance to IC firms as design complexity of ICs has increased—an importance that will further increase in the future.3

We will then outline various measures taken to address this shortage, and draw some implications for the United States of these actions taken by Japanese firms.


The problems confronting the Japanese software engineering industry can be summarized as follows:

  • The "soft crisis" is a function of the explosion in the growth of the Japanese software industry in bumping up against a fairly inelastic supply of software engineers.

  • Japanese educational institutions have proved to be inadequate to the task of increasing the supply of software engineers. They continue to act as a bottleneck because the Japanese universities are slow to reorient their programs to emerging fields—if they are able to do so at all.

The pressures of the "soft crisis," together with the inadequate response of Japanese universities, will force the Japanese companies to resort increasingly


The term "soft crisis" comes from the Japanese abbreviation of "software crisis." Professor Shirakawa of Osaka University first coined this term in 1988.


Based on the value of sales of independent IC CAD tool vendors, the IC CAD tool business is relatively small, though expanding rapidly. Worldwide sales of all major IC CAD vendors in 1989 were estimated to be about $170 million. By comparison, the worldwide revenues of semiconductor firms in 1991 totaled about $50 billion and are expected to expand at a 10–15 percent annual compound rate of growth.


See William F. Finan, and Jeffrey Frey, Development of Integrated Circuit Computer Aided Design Tools in Japan, Report to the Semiconductor Research Corporation, July 1991. This paper draws heavily on the field interviews they conducted.

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