U.S. makers of computers and semiconductor chips yesterday declared an end to a four-year feud over trade policy with Japan, moving themselves -- temporarily at least -- a bit closer to the way their Japanese competitors do business.
Since the mid-1980s, the top priority of U.S. chipmakers has been to prevent repetition ofwhat they call widespread "dumping" of Japanese chips in this country at illegally low prices. But computer makers have generally welcomed the imports. By getting the basic components of their products at lower prices, they keep production costs down, making their computers more competitive worldwide.
Yesterday, after months of negotiation between top executives of the two industries, whose products are considered key to the future competitiveness of the United States in world trade, a joint letter was sent to President Bush. It outlined a common position on what to do about a controversial U.S.-Japan semiconductor trade agreement that expires next year.
"U.S. industry can work together on critical issues," Rod Canion, chief executive officer of Compaq Computer Corp. said yesterday at a Washington press conference. Many companies have "come together with a united position."
The feud would not have happened at all in Japan, because there chipmakers and computer makers are one and the same. Vertically integrated giants like NEC Corp., Hitachi Ltd. and Fujitsu Ltd. mass-produce the tiny silicon chips for themselves and ship them to other in-house divisions for assembly into finished products.
In the post-war era, Japanese government policies and a corporate culture that smiles on centralization and "targeting" of specific technologies have helped build companies like these into world titans. They are organized into well-financed groupings called keiretsu, whose members foster lifelong relationships with one another in the form of sales and cross-ownership of stock.
The U.S. computer and chip industry, with a few exceptions such as International Business Machines Corp., is highly decentralized, composed of thousands of small and entrepreneurial companies scattered across places such as California's Silicon Valley and the Boston area's Route 128 corridor. Financing is fleeting, bankruptcy a constant possibility.
"We're highly competitive, highly individualistic," said Phillip Grub, a professor of international business at George Washington University. "There isn't the spirit of cooperation" found in Japan.
Under the Reagan and Bush administrations, Washington officials have argued that market forces must determine the success or failure of industries. Critics fault the White House for not acting in the 1980s, when seven of the United States's nine producers of memory chips withdrew from the business in the face of massive Japanese competition.
But in 1986, to settle formal complaints of dumping filed by U.S. companies, the U.S. and Japanese governments negotiated a five-year pact by which Japanese chips would be sold in the United States only at or above an officially determined "fair market value." Japan also would undertake to give foreign chipmakers additional share in its clubby home market.
After the pact, memory chip prices soared and generally stayed well above that fair market value. In press interviews and in visits to Capitol Hill, computer executives complained that the agreement was needlessly inflating costs. Chipmakers, in turn, accused computer makers of not backing their run at the Japanese market, out of fear of offending Japanese suppliers.
U.S. trade officials, unclear on what to seek from Japan, pressed the two sides to come to terms. Last March, chief executives from both sides met in Palo Alto, Calif., setting the stage for the accord announced yesterday. The task was facilitated by the fact that things have changed since 1986. Both sides say Japanese companies are no longer dumping and that sales to Japan have grown, if slowly, to a bit more than 13 percent of the market there.
They now call jointly for a new, five-year agreement with Japan, to start next year. It would drop the fair market value system but provide for speedier dumping investigations and continued pressure on Japan to buy more foreign chips. It would give that country an extra year -- until 1993 -- to meet a commitment U.S. officials say it made to raise the market share for foreign chips to 20 percent.
Cooperation has begun, but most in the industry have no plans to abandon their traditional diversity, feeling that on balance it has been a source of strength. The industry "has been driven by companies whose sole purpose is to put those new-generation products on the market and get those prices down," said Michael Gadbaw, an attorney who represents the chipmakers' trade group, the Semiconductor Industry Association. "That merchant mentality ... has been a tremendous source of dynamism."