Unfortunately, it seems we Yankees do not possess a monopoly on ingenuity, for the Japanese semiconductor industry has proven very competitive. In one particular area–the production and sale of general‐purpose memory chips, so‐called DRAMs (Dynamic Random Access Memory) and EPROMs (Erasable Programmable Read Only Memory)–the performance of American companies has been disastrous. In 1975, U.S. merchant producers (companies that make chips to sell to others rather than just for their own internal use) had 100 percent of the U.S. DRAM market. In 1986, they had 5 percent of that market.(1) When all chips sold by merchant producers are taken into account, the U.S. producers’ market share declined from 60 percent in 1975 to less than 50 percent in 1985, while the Japanese share rose from 20 percent to 40 percent in the same period.(2)
Naturally, such a loss of industrial competitiveness and the accompanying losses in employment quickly turned the issue from a private one into a public one. In 1983, the Semiconductor Industry Association (SIA) published a report that accused the Japanese of a variety of unfair trade practices.(3) In 1986, the United States and Japan signed the Semiconductor Trade Agreement, under which the Japanese promised to take steps designed to alleviate the plight of American chipmakers. In February 1987, the Department of Defense’s Science Board issued its “Report on Defense Semiconductor Dependency,” which asserted military reasons for protecting and strengthening America’s semiconductor industry; in April 1987, in response to Japanese violations of the 1986 Semi‐ conductor Trade Agreement, the U.S. government imposed trade sanctions on Japanese imports; and, currently, the congressional trade bill would authorize $500 million over the next five years to finance Sematech, a government‐industry research consortium to develop new semiconductor manufacturing techniques, a proposal advanced by the SIA and then by the Defense Science Board.
This, of course, is not the first time foreign trade and protectionism have been discussed in the United States, and will certainly not be the last. In a democracy, it is inevitable that whenever one segment of society feels put upon by forces it believes are outside its control, it will petition the government for help; and there might well be some cases where a hands‐off approach to international trade is not the best solution. However, before the United States embarks on a new round of trade protectionism, it should first investigate where the true interests of the nation as a whole–not just the semiconductor manufacturers–lie.