Maximizing U.S. Interests in Science and Technology Relations with Japan (1997) / Chapter Skim
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5 U.S.-Japan Technology and Competitiveness Trends in Key Industries
5 U.S.-Japan Technology and Competitiveness Trends in Key Industries
Pages 76-112
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From page 76... ...
Japanese companies are more open to reciprocal relationships. Japanese markets are somewhat more open, particularly in consumer products.
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From page 77... ...
companies could devote much effort to penetrating the Japanese market, Japanese autos were making considerable headway in the United States. Japanese Industry Advantages The Japanese auto industry's gains during the 1970s and 1980s were made possible by significant advantages it enjoyed over the U.S.
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The gap was widened by a strengthening of the dollar in the early 198Os. Several serendipitous trends in the global economy during the 1970s and 19SOs also were favorable to the Japanese auto industry and hindered U.S.
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At the same time, the Japanese auto industry suffered from sluggish demand in the domestic market and cost pressure on exports of vehicles and parts to the United States. Most Japanese automakers reported losses during this period.
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companies have made considerable strides in recent years.8 During the 1990s, for example, Chrysler adapted a number of lessons from Japanese "best practices" and improved its product development process considerably. One of the most significant challenges faced by the Japanese auto industry in recent years has been to maintain manufacturing and product development excellence while reducing costs.
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Recent studies indicate that Japanese auto suppliers remain the most productive and deliver the highest quality.~4 Global * traiegies and Approaches to Rapidly Growing Asian Markets Tapping rapidly growing markets in Asia will be key to future growth for U.S.
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Willingness to transfer technology was reportedly a factor in China's decision to choose GM as the foreign partner for its sedan venture.22 Proton, the Malaysian auto company, consistently requests expanded technology transfer from its Japanese partner, Mitsubishi Motors.23 Access to the Japanese market remains an issue for U.S. automakers and suppliers.
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From page 83... ...
suppliers indicates that a focus on supplying the production of Japanese companies outside Japan can deliver many of the market participation benefits revenue for future technology development and learning from `demanding customers that contribute to maintaining and enhancing technological capabilities. Since the production of Japanese auto companies outside Japan is likely to grow much more quickly than production inside Japan, this will represent a significant growth market during the coming decade.
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Electric vehicles face significant technological and market barriers. Current electric vehicles utilizing lead acid batteries require difficult trade-offs in performance, range, and ease of recharging.
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A more level playingfield is emerging in the industry as access to the Japanese market improves and Japanese-owned manufacturing and R&D facilities in the United States make greater contributions to U.S. employment and living standards.
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The ability of foreign-based companies, particularly suppliers, to participate in the Japanese market is still an issue. ADVANCED MATERIALS The field of advanced materials is comprised of a diverse group of technologies, including high-performance glass and ceramics, polymers, specialty metals, precision coatings, and composite materials.
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From page 87... ...
This would give Japanese customers a competitive edge through preferred access.40 Although Japanese companies still control large global market shares in some critical supplier areas, particularly electronic materials, concern over this issue has declined somewhat in recent years as the Japanese industry's momentum in global electronics has slowed and competition has reappeared in some areas where lapar~ese companies had established dominar~ce. 37 David Duke, presentation to the Competitiveness Task Force, January 1995.
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From page 88... ...
Box 5-l describes an important example and illustrates that the ability to participate in the Japanese market is a major determinant of whether the United States will derive maximum economic benefits from science and technology interaction with Japan. An expanded discussion of this point is included in Chapter 6.
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From page 89... ...
U.S. biotechnology companies number over 1,300, with nearly $13 billion in annual revenue and 89
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45 "Gyo ho no kenkyu" (Study of the Industry Law) , Nihon Keizai Shimbun, July 31, 1995, p.
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Using a -I to +! scale, with zero being parity, a recent Japanese government report ranks Japan's level of basic research in life sciences as -0.9 compared with the United States and -0.5 compared with European However, there are several U.S.-Iapan issues and trends in areas such as investments in R&D capabilities and market participation that will have an impact on U.S.
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researchers to Japan. Japanese government support for life sciences and biotechnology research also has contributed to U.S.
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While larger U.S. and European companies are better able to access the Japanese market today than in the past, it is still difficult for smaller U.S.
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biotechnology companies. SEMICONDUCTOR MANUFACTURING EQUIPMENT Closely linked to the rapid competitive advances made by the Japanese semiconductor device industry during the late 1970s and 1980s were parallel gains by Japanese firms in the semiconductor manufacturing equipment (SME)
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Industry Evolution The development and competitive dynamics of the SME industry are tightly linked to conditions in its customer base, the semiconductor device industry. In the early days of the semiconductor industry the late 19SOs and early 1960s~evice makers such as Texas Instruments grew their own materials and designed and built their own tools.70 This early period witnessed the growth of several specialized manufacturing equipment and materials companies such as Materials Research (sputtering equipment)
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machinery.72 Through this process, Japanese SME vendors forged close ties with device makers and developed a range of competitive prod~ucts.73 Japanese device makers used a conservative approach to product and process design in order to beat U.S. firms in the introduction of the 64K DRAM (dynamic random access memory)
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device makers contributed to the difficulties of domestic SME vendors, the improving position of the U.S. semiconductor industry over the past few years has helped fuel a U.S.
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device makers have put considerable effort in recent years into improving manufacturing performance and have made considerable progress. An ongoing study of semiconductor manufacturing performance by the University of California at Berkeley indicates 8~ According to Dataquest data, Japanese equipment spending was almost double that of North America in 1990 and 1991.
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Perhaps the best example is Applied Materials, which is now the largest SME vendor in the world.89 The firm manufactures equipment for chemical vapor deposition, physical vapor deposition, epitaxial and polysilicon deposition, plasma etching, and ion implantation. Because of its superior technology and investment in an independent sales and service structure in Japan, sales in Japan have grown rapidly, in line with overall performance.90 The Contributions and Limitations of Technology Policy Solutions A number of experts and industry leaders in the semiconductor and SME sectors agree that SEMATECH, a consortium of leading semiconductor device makers and the U.S.
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Although at the time some observers argued that the SVG-Canon agreement, in combination with GCA's closure, would eventually spell the end of U.S.-owned and -based capabilities in advanced production steppers, the situation appears different as this is written. Throughout 1994 semiconductor device makers announced new plans for expanded capacity.
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industry is in a much better position than it was a few years ago, access to the Japanese market is still a concern of aR but the strongest companies, and limited access to Japanese-owned fates outside Japan may raise additional problems in the future. Given the sudden onset of unfavorable circumstances, the industry could f nd itself in deep trouble once again.
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The mainframe computer was the central product, and business demand drove market growth. The Japanese government and the integrated Japanese electronics firms were aware of the significance of mainframe computers from an early date.
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Just as the Japanese computer industry was catching up with IBM and Cray, the center of gravity for information technologies markets shifted dramatically toward distributed computing, the development of packaged applications software for open architectures, and more recently to new business and entertainment applications enabled by the Tnternet.~°~ In this environment the continuing advantages of the U.S. system, including a strong human resource and university research base, financial institutions well adapted to support investment in the commercialization of new technologies, and most importantly an open and dynamic market for information technology products, have enabled innovative U.S.
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See Nihon Keizai Shimbun, July 22, 1996, p.
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In these areas, differences in the structure of the Japanese market have not constituted a disadvantage. For example, fragmented standards have not been a major barrier to the diffusion of "stand-alone" systems like games and machine tools.~° The needs of supercomputer users are usually highly specialized, with applications software developed inhouse or by contractors, so purchasing decisions are largely determined by price and hardware capabilities.
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, Nihon Keizai Shimbun, October 2, 1995, p.
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One important question for the future is whether the Japanese market will come to play a similar role. lapan's competitive, dynamic market plays an important role in pushing new technology in areas such as consumer electronics and games.
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SOURCE: Goldman Sachs & Co., as compiled In The Wall Street Journal, February 14, 1996, p.
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companies pursue their own strategies for accessing Asian markets and technological capabilities. The approach of Japanese government and industry to the Personal Handy-Phone System (PHS)
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intellectual property rights laws are in many cases sufficient to discourage illegal copying and patent or copyright infringement efforts. A nascent Japanese plan to amend its copyright laws to allow unrestricted software Recompilation, which might have allowed Japanese firms to reverse engineer U.S.
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Some Asian countries could also become the source of engineering development for multinational corporations, as India is today in some areas of software. · These trends wiR result in further intensification of global competition, resulting in consolidation, exit of weaker companies, emergence of important new Asian companies, and market share shifts between companies and countries that cannot be foreseen at this point.
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