Keeping the U.S. Computer Industry Competitive Defining the Agenda (1990) / Chapter Skim
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2. Hardware
2. Hardware
Pages 18-29
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From page 18... ...
The $4.6 billion U.S. semiconductor-manufacturing-equipment industry makes the tools- wafer-processing, testing, and assembly equipment that semiconductor manufacturers use to fabricate integrated circuits and related electronic devices, the source of revenues totaling $24 billion in 1988.1 In turn, 40 percent of all semiconductors sold in the United States are bought by domestic computer manufacturers, who, according to the Department of Commerce, were estimated to have sold $70 billion worth of computing equipment in 1989.2 Perhaps double that amount may have been earned by domestic manufacturers in 1989 if systems software, service, maintenance, and leasing revenues are included, according to an industry trade group.3 Each of these industries is, in tum, divided into segments defined by the products they make and sell.
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From page 19... ...
In contrast, Japanese computer manufacturers, large integrated fops that produce semiconductors for their own diversified line of products and sell the rest on the world markets, avoided the bottleneck and continued to increase their relative share of international sales of comput ers. The ripplelike effects and the contributing causes of what is now called the "DRAM fiasco" are instructive, and they will be discussed in greater detail below.
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From page 20... ...
Japan established a series of programs aimed at developing world-competitive capacity for manufacturing 64-kilobit DRAMs, but, aided by a booming market for memory chips during the late 1970s and early 1980s, that nation's firms beat the timetable. Japanese semiconductor manufacturers capitalized on the shortage to achieve a significant share of the market for l~kilobit DRAMS.
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From page 21... ...
Why did U.S. merchant semiconductor manufacturers choose to exit from the DRAM market?
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From page 22... ...
While acknowledging that this perspective is embodied in the tactical thinking of individual firms, many colloquium participants pointed out that the collective result of these tactical decisions can be sectorwide harm. The nearly complete loss of the DRAM market, they maintained, inflicted strategic damage on the entire hardware industry, and perhaps the entire U.S.
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From page 23... ...
As a result, Moore and others said, the strategic commitment that building such a facility would require will not be forthcoming without external incentives or a means of distributing the inherent risk. Interestingly, shortly after the colloquium seven hardware manufacturers Intel, IBM, Hewlett Packard, Digital Equipment Corporation, National Semiconductor, Advanced Micro Devices, and LSI Logic announced their intention to build a joint manufacturing facility for producing memory chips.
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From page 24... ...
DRAM-manufacturing capabilities are directly transferable to these fully or partially customized electronic devices, and Japanese firms now control about 40 percent of this high-growth market.9 Speeding the competition's catch-up efforts, according to several colloquium participants, are technology-licensing agreements that, while advantageous to individual firms, are strategically damaging to the hardware industry. Among the technologies transferred to Japanese semiconductor manufacturers in recent licensing agreements are two advanced microprocessor designs based on reduced instruction set computing (RISC)
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From page 25... ...
What is interesting about that, I think, is the striking degree to which this situation demonstrates the continuing ability of Japanese firms to both cooperate and compete." Similar trends are emerging among the growing computer sectors of other Asian countries, including Taiwan and South Korea, which are gaining a growing share of the personal computer market. Like the pattern of competition facing U.S.
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From page 26... ...
Technological Convergence of Industries The comparison of computers to consumer commodities was also made by Ferguson, who foresaw similarities that went beyond volumes of production. According to the MIT researcher, a common technology base of "digital optics, digital microelectronics, and digital magnetics" the technology areas that have been the wellspring of advances in computer and telecommunications equipment are "going to be used in a wide spectrum of products." Included in this category of products, by Ferguson's accounting, are digital facsimile machines, printers, high-definition televisions, and home communications and information systems.
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From page 27... ...
companies to exploit the converging technology base and the production economies of scope it implies and to diversify into many product lines. Manufacturing Both commoditization and convergence to a common technology base make manufacturing efficiency and flexibility essential for competing in domestic and global markets.
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From page 28... ...
Some observers predict that Sun is destined to repeat IBM's experience with its personal computer, but Sun Chief Executive Scott McNealy espouses what others view as a pragmatic view of the drive for standardization. "I don't believe the world can go back to proprietary systems," McNealy said after his company licensed two Taiwanese feds to manufacture personal computers based on Sun's microprocessor design.13 Sun is a staunch advocate of standardization, and through its licensing agreements with foreign and domestic firms, it is maneuvering to have its system adopted as the industry standard, thereby creating a relatively high-volume market.
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From page 29... ...
CBEMA. Information Technology Industry Global Market Analysis, Industry Marketing Statistics Committee, Washington, D.C., 1989.
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