International Friction and Cooperation in High-Technology Development and Trade Papers and Proceedings (1997) / Chapter Skim
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From Conflict to Cooperation: Trade in Semiconductors
From Conflict to Cooperation: Trade in Semiconductors
Pages 89-106
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From page 89... ...
The semiconductor industry has been the subject of dramatic trade confrontations between the United States and Japan since the mid-1980s, the last time the United States threatened and actually went forward with imposing trade sanctions. It has been the subject of less well-known but equally significant trade disputes between Europe and Japan, between the United States and Europe, and increasingly between the many new entrants in Asia who have suddenly become such significant forces in the industry Korea, Taiwan, and Singapore.
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From page 90... ...
industry owes a debt to both aggressive intervention on the trade front, through the semiconductor trade agreement and the market-opening negotiations with Japan, and the domestic support to technology in the form of such enterprises as SEMATECH. Indeed, this sector would seem to be the embodiment of the central tension that we have been talking about here that exists in our system of technology and trade: that is, the coexistence of very different national, perhaps regional, political economies in the same economic space, each of which wants a piece (preferably a large piece)
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From page 91... ...
Current Trends in the Semiconductor Industry Claudine Simson, Nortel I would like to share with you my views on the evolution of trade in semiconductors, along the following lines: First, I would like to address the semiconductor market trends and evolution, then look at some of the trade issues, the technology trends in this industry, the challenges that each faces, and, finally, I will try to describe some of the new factors that I believe are going to influence the evolution of the market, the future of the chip market, the impact of the yen's trends, and finally the issues of dependency and cost. The growth of the semiconductor industry ultimately depends on the growth of the electronic equipment market.
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From page 92... ...
From 1992 to 1994, Japan's share of DRAM production decreased 8 percent, whereas Korea and the Pacific increased 5 percent. This is exemplified by the five top memory market leaders from 1993 to 1994.
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From page 93... ...
The export market share and the trade figures are going to be essentially meaningless. With respect to tariff structures, there was a new GATT proposal in 1994, which is being reviewed by the United States.
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From page 94... ...
Japan and North America are each responsible for one-third of this heavy capital spending, whereas the rest of the world is split on the remaining one-third. Continuing growth in capital investment is expected, and it will impact major decisions as to the future of the semiconductor companies.
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From page 95... ...
In contrast, DRAM production remains firmly in the hands of the Japanese firms, which account for 54 percent of worldwide production, whereas the rest of the world, mainly Korea and Asia Pacific, are at a sizable market share of 28 percent, with the United States at only 18 percent. If this trend in very high growth and monopolistic production of DRAM products between Japan and Korea is to continue, we could be entering the twentyfirst century with DRAM shortages and price control issues similar to those of the oil energy crisis of the 1970s.
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From page 96... ...
The revenue breakdown is as follows: The semiconductor represents 35 percent of the total revenue and 32 percent of consumer electronics; 18 percent information products, such as personal computers, monitors, printers, etc.; and 15 percent telecommunications, such as telephones, cellular phones, and printing systems. We are also doing well in a few product areas.
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From page 97... ...
Today, we cannot supply all the demand, and, even though we are increasing our capacity in Korea and elsewhere, we just cannot meet the demand from our customers. Personal computers regularly demand more memory.
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From page 98... ...
The semiconductor business must also face major barriers, such as the protection of industries through tariff barriers, price undercutting, and dumping charges. The European tariff on DRAM is still 14 percent.
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From page 99... ...
In other cases in which we had joint development agreements with some companies, we found that sometimes the other company did not have the same urgency to develop the products that they were supposed to develop according to our agreement. These were the type of joint development activities in which we developed so many parts, they developed so many parts, all to produce a bigger portfolio.
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From page 100... ...
I will give you one example. Two major companies enter into a joint development agreement for a process technology.
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From page 101... ...
DISCUSSION MICHAEL BORRUS: We have a description from all three panelists of an industry that is continuing to progress at a remarkable rate technologically, in which the associated costs of doing so are forcing more and more cooperation. Another element, not much mentioned, but implied in the remarks of all of the speakers, is the degree to which cooperation that takes the form of foreign direct investment is partly motivated and encouraged by government policies in those other locations.
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From page 102... ...
OWEN WILLIAMS: There are interdependencies existing today, even within the semiconductor companies. We buy wafers from Japan and from Germany.
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From page 103... ...
My second question is in regard to the business-government relationship between the Korean government and, for example, some semiconductor industries. I thought there was a lot of friction between the government and the Samsung semiconductor industry from the very beginning.
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From page 104... ...
The Europeans have a 14 percent tariff, but still there is a lot of investment in the product that would have gone to Europe anyway. One Japanese company dominates the packaging, but when their factory burned down, it really did not matter because Motorola had a wonderful plan to compensate for it.
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From page 105... ...
Siemen's dramatic reappearance as a major player in memory chips in this industry is partly the result of European cooperative technology programs, partly the result of indirect government subsidies through low-cost capital, and other political agreements. Foreign production in Europe is completely the result of the common external tariff on semiconductors.
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From page 106... ...
So we counterbalance that with government policies and industry initiatives aimed at recreating some capacity within the location, in Europe behind protective walls, in the United States through the semiconductor trade agreement and investment in SEMATECH, in Asia these days through a variety of concerted government and business relationships. The aim is to keep everyone honest in the market, to ensure that your users of the technology have timely access at a reasonable cost.
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