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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy (1992)
Office of International Affairs (OIA)

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy

U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy

Committee on Japan

Office of Japan Affairs

Office of International Affairs

National Research Council

National Academy Press
Washington, D.C. 1992

 Page
I

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy Committee on Japan Office of Japan Affairs Office of International Affairs National Research Council National Academy Press Washington, D.C. 1992

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The National Academy of Sciences is a private, nonprofit self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Frank Press is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievement of engineers. Dr. Robert M. White is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M. White are chairman and vice-chairman, respectively, of the National Research Council. This report was prepared with support of a grant from the United States-Japan Foundation. Available from: Office of Japan Affairs National Research Council 2101 Constitution Avenue, N.W. Washington, DC 20418 National Academy Press 2101 Constitution Ave., N.W. Washington, DC 20418 Library of Congress Catalog Card Number 92-64124 International Standard Book Number 0-309-04779-X S627 First Printing, July 1992 Second Printing, October 1992 Copyright © 1992 by the National Academy of Sciences Printed in the United States of America

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy COMMITTEE ON JAPAN Erich Bloch, Chairman Council on Competitiveness C. Fred Bergsten Institute for International Economics Lewis M. Branscomb Harvard University Harold Brown Center for Strategic and and International Studies Lawrence W. Clarkson The Boeing Co. I. M. Destler University of Maryland Mildred S. Dresselhaus Massachusetts Institute of Technology Daniel J. Fink D. J. Fink Associates. Inc. Ellen L. Frost Institute for International Economics Lester C. Krogh 3M Co. E. Floyd Kvamme Kleiner Perkins Caufield & Byers Yoshio Nishi Hewlett-Packard Co. Daniel I. Okimoto Stanford University John D. Rockefeller IV United States Senate Richard J. Samuels MIT Japan Program Robert A. Scalapino University of California, Berkeley Hubert J. P. Schoemaker Centocor, Inc. Ora E. Smith Illinois Superconductor Corp. Albert D. Wheelon Hughes Aircraft Co. (retired) Office of International Affairs Ex Officio Members: Gerald P. Dinneen, Foreign Secretary, National Academy of Engineering James B. Wyngaarden, Foreign Secretary, National Academy of Sciences and Institute of Medicine

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy SEMICONDUCTOR WORKING GROUP ON PRIVATE SECTOR TECHNOLOGICAL LINKS BETWEEN THE UNITED STATES AND JAPAN Daniel I. Okimoto (Co-Chairman) Stanford University Sheridan Tatsuno (Co-Chairman) NeoConcepts Edward J. DeWath Consultant E. Floyd Kvamme Kleiner Perkins Caufield & Byers Yoshio Nishi Hewlett-Packard Co.

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy OFFICE OF JAPAN AFFAIRS Since 1985 the National Academy of Sciences and the National Academy of Engineering have engaged in a series of high-level discussions on advanced technology and the international environment with a counterpart group of Japanese scientists, engineers, and industrialists. One outcome of these discussions was a deepened understanding of the importance of promoting a more balanced two-way flow of people and information between the research and development systems in the two countries. Another result was a broader recognition of the need to address the science and technology policy issues increasingly central to a changing U.S.-Japan relationship. In 1987 the National Research Council, the operating arm of both the National Academy of Sciences and the National Academy of Engineering, authorized first-year funding for a new Office of Japan Affairs (OJA). This newest program element of the Office of International Affairs was formally established in the spring of 1988. The primary objectives of OJA are to provide a resource to the Academy complex and the broader U.S. science and engineering communities for information on Japanese science and technology, to promote better working relationships between the technical communities in the two countries by developing a process of deepened dialogue on issues of mutual concern, and to address policy issues surrounding a changing U.S.-Japan science and technology relationship. Staff Martha Caldwell Harris, Director Thomas Arrison, Research Associate Maki Fife, Program Assistant

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy This page in the original is blank.

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy Contents 1.   INTRODUCTION   1 2.   BACKGROUND: TECHNOLOGY TRANSFER AND LATECOMER CATCH-UP   4 3.   STRATEGIC ALLIANCES AND TECHNOLOGY TRANSFER   9     Trends in U.S.-Japan Alliances   11 4.   FORCES DRIVING THE FORMATION OF STRATEGIC ALLIANCES   15     Generic Forces   15     High-Technology Factors   17     U.S.-Japan Alliances   19     Business Cycles, Technological Change, and Political Factors   23     Recessions: Lessons Learned   25 5.   A TYPOLOGY OF ALLIANCES   31     Direction of Technology Flow: National Interests   34     Asymmetrical Pairings: Large and Small Companies   39     Symmetrical Pairings: Large Companies   46     Why Diversification?   48

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U.S.-Japan Strategic Alliances in the Semiconductor Industry: Technology Transfer, Competition, and Public Policy 6.   ISSUES FOR U.S. POLICY: JAPANESE INVESTMENTS AND U.S. COMPETITIVENESS   51 7.   ISSUES FOR U.S. POLICY: NATIONAL SECURITY   54 8.   ISSUES FOR U.S. POLICY: GLOBAL TECHNOLOGICAL STRATIFICATION AND U.S. TECHNOLOGICAL CAPABILITIES   59     Upstream Trends: The Semiconductor Equipment Industry   59     Downstream Trends: Systems, Components, and Proprietary Architectures   61 9.   POSSIBLE SCENARIOS FOR U.S.-JAPAN ALLIANCES AND THEIR IMPLICATIONS FOR THE UNITED STATES   67     Scenario 1: Gradual U.S. Recovery   67     Scenario 2: Market Share Equilibrium   68     Scenario 3: Gradual U.S. Decline   69     Scenario 4: Japanese Dominance   70     Scenario 5: Pacific Rim Dominance   71 10.   CONCLUSIONS   74     Examples of U.S.-Japan Alliances: Assessing Costs and Benefits   75     Semiconductors as a Strategic Industry   83     Competitive Advantage: Issues for U.S. Industry   86     National Interests: Issues for the U.S. Government   87     APPENDIXES     A.   Case Studies of U.S.-Japan Technology Linkages in Semiconductors   91     Case I: Motorola-Toshiba   91     Case II: Sun-Fujitsu   101     Case III: Kubota Computer   109 B.   Examples of Japanese Acquisitions and Investments in U.S. Semiconductor Companies   113 C.   Examples of Japanese Acquisitions and Investments in U.S. Semiconductor Equipment and Materials Companies   115     D. Workshop on U.S.-Japan Technology Linkages in Semiconductors: Agenda and Participants   117