Will the real Hitachi please stand up? Hitachi Ltd., the Japanese electronics giant, has again become a symbol of the deepening rupture of trade relations between the United States and Japan.
Three years ago, an FBI sting operation led to charges that Hitachi employes allegedly pirated trade secrets from International Business Machines Corp. Hitachi denied the charges and then agreed to make a cash payment to IBM to settle the dispute.
Now comes the smoking gun memo, the now-famous internal sales brief prepared by Hitachi's American sales staff in Silicon Valley that outlines an "anything goes" strategy for undercutting U.S. semiconductor product prices. One page of the memo is captioned "the 10 percent rule" and advises: "quote 10 percent below competition. If they requote . . . bid 10 percent under again. The bidding stops when Hitachi wins."
The U.S. semiconductor industry, reeling from a surge in low-priced imports, cites the widely distributed memo as evidence of a predatory intent by its Japanese rivals. Andrew Grove, president of Intel Corp., says it demonstrates "the fact that when they have excessive capacity, they sell irrespective of costs."
Yesterday, Hitachi presented a different picture, announcing that as a gesture of good will, it would buy an additional $120 million in electronics components and equipment in the United States, a 50 percent increase above its current level of purchases here, and would boost its investments in manufacturing operations here.
"Obviously, we do not operate in a political vacuum," said Toshi Kitamura, executive managing director of Hitachi Ltd., in charge of its international sales. "We fully recognize the political components of the present trade crisis." And in an interview, he added, "We would like to reduce any tensions."
In the interview, Kitamura repeated his company's disavowal of the memo. "That is merely a sales flyer. Sales promotional hype," he said, attributing it to the "excessive enthusiasm" of "our young American employes. . . . They were not authorized to do so. It was not company policy." According to Hitachi, the excessively enthusiastic employes were hired from its competitor, Intel. "We admit it was poor judgment." So by his account, the smoking gun was in an American's hand.
Hitachi's announcement yesterday was welcomed as a forward step by Alan Wolff, attorney for the Semiconductor Industry Association. "It indicates a sensitivity to the problem and moves in the right direction," said Wolff. But he called it a very small step -- one that is not likely by itself to ease the movement in Congress toward trade sanctions against Japan.
The growing legislative hostility toward Japan is rooted in complaints like those of the semiconductor industry, which charges that it has been barred from a fair chance to compete in the Japanese marketplace. "We've gone through liberalization steps, currency changes back and forth. None of it makes any difference," said Grove. U.S. semiconductor companies' share of the Japanese market remains stuck at a 10 to 15 percent range, regardless of changing economic factors and product advances, he said.
"I don't like to sound like a crybaby. But it's real. It's there," Grove contends. The claims, frequently made in Japan about inferior product quality and uncompetitive prices, don't explain the U.S. disadvantage, Grove said. The rule is that when Intel introduces a new, leading product in Japan, it sells. But when Japanese competitors are able to match it, Intel's sales dry up, he said.
The reason, Grove contends, is that Intel remains an outsider in a Japanese market that is tailored by strong cultural and institutional ties to favor Japanese competitors. And that shouldn't be, Grove said. "We have a fully Japanese sales force. Everybody over there is Japanese. It's not a bunch of naive Americans. We've been in the country since 1969."
But another Hitachi executive, Hiroshi Miyamoto, says that the Japanese subsidiaries of leading American companies like IBM and Intel are not stiff-armed as outsiders. "IBM in Japan is a Japanese company, on an equal basis with us. We Japanese companies feel that way."
That difference between Grove and his Hitachi counterparts in how they see the role of American companies in Japan is at the heart of the worsening trade crisis.
Japan needs to understand the basis of U.S. frustration and look hard at its own market and structures. The semiconductor companies that have lodged the complaint against their Japanese rivals aren't backward, static firms. They are among the most competitive in the United States.
But, as Grove points out, they have to be able to sell, and make a profit in Japan -- just as Hitachi's prosperity depends on its success here. "Japan is the world's second-largest market. In some areas it is the pace-setting market," said Grove. Intel's survival depends on success in Japan.
Hitachi's message yesterday was a peace offering. "No one is to be blamed. . . . Let's compete together," said Miyamoto. "The main thing is to open the market as much as possible. It is quite open now. I believe we would like to push those solutions," said Kitamura. A recognition of the mutual stake that Japan and the United States have in a cooperative economic relationship is a key to the solution.