In fact, the new world order in computer chips has been around for a while. Large joint ventures between bitter rivals in semiconductors have existed since 1987. But both the AMD deal and, on the same day, IBM’s announced $1 billion alliance with Toshiba and Siemens to design and build powerful new memory chips (use to store data in computers) made it clear that huge crossborder strategic tie-ups are no passing fancy. At $1 billion or more to design a new computer chip, “no one company or, now, no one country can go it alone,” says industry consultant Sanford Kane. Even the Japanese now agree with that. The more urgent question, however, is which side benefits most from the deals–the United States or Japan? And though Sanders and others talk of the access their companies gain to the huge-and largely closed-Japanese chip market, skeptics in government and industry worry that the structure of most of the deals points depressingly to yet another victory for Japan.
U.S. executives insist the pessimism is not justified. First, they argue, it is America’s toughest, most “technonationalistic” companies-IBM, Intel Corp., Motorola Inc.-getting involved in the tie-ups. They are not naive. If anything, contends Tom Beerman of the Semiconductor Industry Association, the alliances “show that [we’re] dealing from a position of strength.” And in one important sense that’s true: the firmly established pattern in transpacific joint ventures is for powerhouse Japanese manufacturers to make what ingenious American engineers design in the United States. On the surface this is a case of both sides playing to their respective strengths, and that’s why the deals are made in the first place.
But the economic ramifications of the arrangements are greater than that. John Stern, director of the American Electronics Association in Japan, has argued that the alliances “tend to transfer employment to Japan for the production of products that are sold not just in Japan, but worldwide.” It’s a position hard to quibble with. Intel, for example, which leaped ahead of Japanese innovators in flash-memory-chips, signed on last February with Sharp Corp. as its partner and manufacturer. Flash memory, also the object of the AMD-Fujitsu deal, will be a huge market. The chips can store data even when computers are shut off, eliminating the need for bulky disc drives, thus making portable computers even more portable. In both the AMD and Intel deals, the manufacturing will be done in Japan. (The IBM-led threesome has not yet decided where it will make its chip.)
For most Japanese electronics firms, that’s a no-lose position. For their investment they get access to technologies in which they lag; then they get to manufacture in Japan. They do so knowing that long-term success in the market comes from improving the manufacturability of a given product-that is, figuring out ways to make it more efficiently, but also improving the product itself with changes on the production line.
The recent deals also play to Japan’s interests politically. Semiconductors have been an explosive trade issue since 1987, when the United States slapped $300 million in tariffs on Japanese chip producers. Ever since, it’s been part of Japan’s strategy to blur the “nationality” of chips in order to finesse U.S. demands for greater access to the Japanese market. In fact, an official of the Ministry of International Trade and Industry said last week: “If there are more announcements like this, the border between MADE IN JAPAN and MADE IN U.S.A. will be ambiguous and friction will be gradually reduced.”
How, then, does the United States avoid having American electronic firms turned into design boutiques and technological coupon clippers? The best hope lies in their ability to glean manufacturing know-how back from their Japanese partners. And it could well start to happen. Companies like IBM and Intel have no intention of hollowing out their own huge domestic manufacturing bases. Neither does Motorola, and officials there say their entire organization has learned a lot about quality since building a plant in Japan. Still, skeptics remain, and it’s probably appropriate, if only because the U.S. track record in joint ventures with Japan is clearly dismal. “The Japanese just devote more resources and energy to getting the benefits from these deals,” says one American electronics executive in Tokyo. “When we start doing the same I’d feel a lot better. And we’d better star-now.”
