NAS: semicon alliances give Japan edge

Electronic News, July 27, 1992

WASHINGTON -- A National Academy of Sciences National Research Council report released last week warned that U.S. semiconductor strategic alliances with Japan were "eroding American competitiveness" by transferring more technology to that country's companies than obtained in return.

"The specter of the U.S. supplying new ideas to foreign manufacturers who derive most of the value added is a real concern," the report concluded. "The study of U.S.-Japan technology linkages in semiconductors suggests that considerable effort will be required to avert this outcome."

While most of the 118-page report dealt with the loss of U.S. technology through semiconductor alliances, it said the most recent deals with Japan, in fact, were starting to transfer more semiconductor knowhow. The government group urged that more pressure be brought to bear to insist on reciprocal transfer of strategic technology (See World Roundtable on page 11).

The study charged that the U.S. has no over-all policy to guide potential alliances and joint ventures with Japanese firms to protect this country's interests. Indeed, the report acknowledged there is little control possible, other than relying on the ability of U.S. semiconductor firms to avoid one-way deals favoring foreign competitors.

Entitled "U.S.-Japan Strategic Alliances in the Semiconductor Industry," the report claimed that "A largely onesided outflow of technology from the U.S. to Japan, if continued over the 1990s, could have the cumulative effect of eroding the foundations of America's capacity to innovate in this industry."

The National Research Council panel said an American Electronics Association list of 500 cases of Japanese investments in U.S. electronics companies since 1986 "provides support for those who say this constitutes the largest source of technology transfer to Japan." Yet the report later went on to caution "In looking over the AEA's list of Japanese investments in the semiconductor industry, it is difficult to tell how many are problematic in terms of serious technology loss."

The study also charged that there may be far more unannounced U.S. semiconductor alliances with Japan that are kept secret. "Interviews with U.S. executives suggest that the (announced) figures greatly understate the actual number. Public data may represent less than half of the actual number of American-Japanese alliances."

The government group was especially concerned about small or new-start semiconductor firms "giving away" valuable technology in alliances with vastly larger Japanese electronics firms.

"In negotiating deals with Japanese giants, small U.S. firms usually bargain from a position of overwhelming weakness, given their fragility and lack of independence. To get what they need, they have often felt they had to give up their only valuable asset in technology. If they were unwilling to share their knowhow, potential Japanese partners would not have the slightest interest in striking a deal."

The report recommended that a national forum be set up to help educate small U.S. firms in negotiating alliances with Japan--drawing on the experience of other American firms with successful deals.