lagged behind Toshiba in the development of 1M DRAM. MITI hoped to avoid stimulating the US semiconductor industry which was behind its Japanese counterpart in DRAM development.
These factors helped to explain the actions of Japanese electronics firms which were the leading semiconductor producers. Although the overall share of foreign semiconductors reached 20 per cent in the fourth quarter of 1992, the leading semiconductor producers attained the goal earlier (Table 5.9). While NEC and Mitsubishi Electric attained 20 per cent by 1988, Hitachi, Toshiba and Fujitsu reached 20 per cent in 1990.
Table 5.9 Shares of Foreign Semiconductors in Major Electronics Firms, 1986-91
(per cent) Company 1986 1988 1989 1990 1991 NEC 20.5 20.8 21 22 24 Toshiba 12 16.3 18.5 20 20.8 Hitachi 8 15 17 20 - Fujitsu 8 15 18 20 - Mitsubishi Elect 20 20 20 21 22 Oki Electric 21 22.5 23 23 - Matsushita - 9.5 13 - 20 Sony 4.2 7-8 13-14 - 20
Sources: Nikkei Bijinesu (26 March 1990, p.14), Nihon Keizai Shimbun (26 March 1989; 12 April 1990).
The Semiconductor Arrangement was a critical factor in inducing the major semiconductor producers to commit themselves seriously to expanding market access. General managers of major electronics firms admitted that the arrangement functioned as a catalyst in encouraging them to undertake market opening activities.83 However, any interpretation of developments that focuses exclusively on the effects of the accord alone is simplistic. The semiconductor sector alone did not expand market access in Japan in the late 1980s. A sharp expansion in imports was seen in various electrical and electronics products. US producers alone did not increase semiconductor sales in Japan. In the 1990s, exports of Korean semiconductors grew more rapidly than those of the
United States, while the US share of total imports of integrated circuits fell from 70 per cent in 1990 to 50 per cent in 1995 (Table 5.10).
Table 5.10 Imports of Integrated Circuits, 1990-95 (billion yen; per cent)
1990 1991 1992 1993 1994 1995* United States 265,630 280,084 250,137 286,263 331,338 196,362 (70.8) (68.8) (64.5) (60.9) (53.5) (50.2) Europe 36,788 31,717 26,995 26,807 27,014 14,029 (9.8) (7.8) (7.0) (5.7) (4.4) (3.6) South Korea 32,658 40,594 43,435 80,678 155,901 108,800 (8.7) (10.0) (11.2) (17.2) (25.2) (27.8) Taiwan 15,124 19,642 14,836 19,084 28,051 17,966 (4.0) (4.8) (3.8) (4.1) (4.5) (4.6) Others 25,224 36,167 52,316 56,894 76,961 53,692 (6.7) (8.6) (13.5) (12.1) (12.4) (13.7) Total 375,424 407,204 387,719 469,726 619,265 390,849
Note: The figures in parenthesis are the percentage share in the total imports. * from January to June.
Source: EIAJ, Internal document.
SIA’s persistent pressure for market access played an important role but not the crucial role. SIA wielded political pressure effectively, but its members, big semiconductor producers in particular, preferred cooperative relations with Japanese semiconductor users to political pressure.84 The Japanese users have acknowledged this stance. When SIA requested the US Trade Representative to list semiconductors as a primary practice under Super 301, UCOM, which continued cooperative programs with SIA for expanding the sales of US semiconductors in Japan, asked SIA its reasons for the request. The answer from SIA was that there was little possibility that the US government would list semiconductors, but it was desirable that semiconductors should remain on the agenda.85 In addition, although governmental negotiations over
84 There are several episodes which reveal this stance. When the continuation of the sanction
became an issue at the renewal o f the arrangement, the US semiconductor industry was passive. At the hearing of the US Senate, for instance, Jerry Junkins, President and Chairman of Texas Instruments, expressed the stance of the US semiconductor industry as follows: ‘Now, we, the SIA and the CSPP [Computer Systems Policy Project], do not advocate a punitive approach toward Japan. Instead, we believe the positive efforts toward compliance that the Japanese have undertaken in the last 2 1/2 years should be encouraged to continue’ (US Senate 1991, p.10). 85 Nikkei Sangyo Shimbun, 6 April 1991.
semiconductors have always been intense, business level meetings have been constructive and cooperative.86
The semiconductor sector was originally fostered under MITI’s encouragement and protection. MITI protected the domestic semiconductor market from foreign firms by initially rejecting applications for wholly owned or majority owned subsidiaries to establish in Japan, and by controlling approval of all patent, technical assistance and licensing agreements (Tyson 1992, p.93). MITI actively encouraged Japanese electronics firms to develop the semiconductor sector through various public projects.87 As a consequence, the semiconductor divisions of Japanese electronics firms maintained closer relations with MITI than other divisions, such as consumer electronics, using formal and informal communication channels. Business leaders in the semiconductor sector and MITI officials exchanged information, some of which touched on sensitive issues.88 Business leaders willingly divulged proprietary corporate information to MITI officials because they believed that it would not be leaked (Okimoto 1984, p. 101). This did not mean that the semiconductor producers always accepted MITI’s guidance. Electronics firms criticised MITI’s concessions in the negotiation of the Semiconductor Arrangement, and NEC rejected MITI’s recommendation to cut production capacity until relations with the United States entered a critical phase.
To understand how the industry changed its stance on market access, attention needs to be paid to the actions of consumer electronics producers represented by Matsushita and Sony. They are not leading semiconductor producers, but they are the leading semiconductor users.89 Compared with other electronics giants, they had difficulty in expanding the purchase of foreign semiconductors because of their high
86 Interview, UCOM, Tokyo, September 1995.
87 More than 60 projects including electron-beam exposure and large-scale integration production
equipment, discrete devices, and low-power, high-performance semiconductors received public support between 1971 and 1977 (Tyson 1992, p.95). In addition, the Japanese government sponsored the joint research association for VLSI operating from 1976 to 1979. This association generated more than 1,000 patents, and laid the foundation o f future development in the semiconductor and computer sectors (Anchordoguy 1989, pp.137-45).
88 MITI and executives o f major semiconductor firms have unofficial meetings periodically. EIAJ
organises the semiconductor executive division, which comprises ten major semiconductor producers, and its hade committee functions as a communication body with MITI (Fujiwara 1988, p.129; Nikkei Bijinesu, 26 March 1990, p.7).
89 In 1992, Matsushita and Sony were the fifth and ninth largest Japanese semiconductor producers,
demand for devices used for consumer electronic products.90 Most US suppliers had little experience in manufacturing chips for consumer products and their production varieties were limited. The proportion of foreign semiconductors Matsushita and Sony used was below 10 per cent in 1988 when that of other major electronics firms was 15 per cent or more (Table 5.9). However, they made serious efforts to boost their purchase of foreign devices. Matsushita organised joint exhibitions for foreign suppliers after 1989, and sent missions for semiconductor procurement. The leading consumer electronics maker also quadrupled the number of design-ins from 40 to 200 between 1986 and 1990.91 Matsushita steadily elevated the share of foreign semiconductors from 9.5 per cent in 1988 to 13.0 per cent in 1989 to 20 per cent in July 1991. The foreign share of total chip purchases in Sony also increased sharply from 4.2 per cent in 1986 to 13-14 per cent in 1989 to 20 per cent in April 1991, and the value of foreign semiconductors purchased grew tenfold between 1986 and 1990.92
The internationalisation of corporate activity provides an explanation for the stance taken by the major electronics firms, especially Sony and Matsushita. The trend was towards multinational production in the semiconductor sector in the late 1980s. Major electronics firms opened DRAM fabrication plants in the United States between 1989 and 1991.93 The major electronics firms have promoted further internationalisation, and they became more cooperative in promoting the access of foreign semiconductors to the Japanese market. Rising internationalisation increased the vulnerability of Japanese electronics firms towards reactions from foreign governments and firms. The semiconductor sector was all the more sensitive to foreign reactions because it had experienced retaliation from the US government in April 1987. Although they criticised the retaliation vocally, and semiconductors were not included in the
90 The ratio o f semiconductors used in the consumer electronics fields was 55 per cent in Matsushita
and 75 per cent in Sony in 1993.