|New Technologies across the Atlantic: US Leadership or European Autonomy? (UNU, 1988, 170 pages)|
|4 Technological strategies|
The semiconductor industry offers a major example of corporate strategy in a new technology that has been deeply characterized by the internationalization of R&D and production. A recent OECD study (Ypsilanti 1985) has examined the forms of technology transfer, from direct investment to joint ventures, licences and technology agreements. The summary of the processes is that
firstly there was a period when American firms dominated the
industry and were involved in direct overseas investment and some licensing
agreements. Secondly, there was a period marked by the emergence of Japanese
competition and the increasing drive of European firms to obtain technology.
Finally, in more recent years, there has been an increasing emphasis on direct
investment and on international cross-licensing between firms which are at a
similar technological level.
(Ypsilanti 1985: 48)
By documenting the many foreign investments, joint ventures and inter-firm agreements, the study draws a picture of highly dynamic corporate strategies, large international technology transfers and rapid changes in the relative position of individual firms, with regard to their specialization, R&D activities, production and marketing strategies.
The picture of direct investments shows a slow down of those by US firms in East Asian countries, a growing presence of European and Japanese firms in the US market and of Japanese companies in Europe. The agreements that are reviewed between 1979 and 1983 are largely for licensing and joint ventures, aiming to get access to new markets and to improve the technological capacity of each company, with greater integration upstream or downstream of production. These agreements have become more frequent after 1983, marking a change in the industry structure (ibid.: 51).
The web of agreements around Intel, a major US semiconductor company, is indicative of what is happening in the industry. Around the ownership by IBM of a share of Intel, there is an extensive network of inter-firm relations. Eleven electronics companies have licenses from Intel (Sanyo, Oky, Nec, Signetics, Mitsubishi, Matra-Harris, Toshiba, Memorex, Siemens, Amd, Harris). Three others (Fujitsu, the former Burroughs and Texas Instruments) have developed agreements with either IBM or Intel. Furthermore, there is extensive cross-licensing between IBM, AT&T and NTT (ibid.: 55). This network is also constantly changing, both in terms of the technology agreements and in terms of equity ownership.
In 1986 these international links have increased further with twenty-seven agreements between Japanese and Western companies (Business Week, 20 April 1987, p.62). The main one took place between Motorola, the US company leader in logic chips, and Toshiba, the Japanese leader in memory chips; they plan to exchange technology and open a joint factory in Japan. Other links were established between American Micro Devices and Sony; LSI Logic and Toshiba; Boeing and NEC; Siemens, Toshiba and General Electric (ibid.).
In this international restructuring of semiconductor R&D and production, the crisis of the US industry should not be overlooked. While in 1980 fifteen US firms were profitably producing a very large share of world chips, in 1987 only three were left; they had total losses of about $800 million in 1986 and since 1981 65,000 workers lost their jobs in the industry (Reich 1987: 65).
The situation in Europe is equally difficult. In 1985 European semiconductors represented only 13 per cent of logic and memory chips and 6 per cent of microprocessors (The Economist, 22 February 1986). Half of the European market is controlled by US and Japanese producers, and the European capacity in specialized productions is declining (ibid.).
The confusion on the European scene is stressed by Ypsilanti, who pointed out that 'the requirements of European firms do not necessarily coincide with an industrial strategy for a "unified" European semiconductor industry. This is true not only in the case of semiconductors, but also in other branches of the electronic industry (computers, telecommunications)' (Ypsilanti 1985: 59).
The strategy of European firms has focused on establishing new direct links with US companies, in a variety of ways, from direct investment, acquisitions of firms and joint ventures, to licensing agreements, second sourcing and co-operative research. Among the major European companies, Philips bought Signetics, Siemens acquired five small US firms and Thomson invested in Mostek (ibid.: 59-60; Business Week, 20 April 1987, p.63). Growing links are also developed within Europe, with the $1 billion project of Siemens and Philips for the next generation of memory chips, and the merger between Thomson and Italy's SGS.
The free-wheeling internationalization of the semiconductor industry has now halted. In July 1986 the US and Japanese governments reached an agreement on market shares and prices that led, for the first time, to a 10 per cent increase in semiconductor prices (The Economist, 6 September 1986). In February 1987 a report by the US Defense Science Board criticized the 'unacceptable' reliance of US military on foreign semiconductors and proposed a $2 billion programme to support American producers. Estimates by Reich suggest that about 40 per cent of the value of advanced electronic equipment in US military systems now comes from Japan, and at the present trend, the share will reach 55 per cent in 1991 (Reich 1987: 64).
Then, in March 1987, the US government prevented the takeover of Fairchild by Fujitsu that was announced in October 1986. Fairchild, a US company owned by a French family, was almost bankrupt and in search of a buyer, but a large share of its production consisted of military chips for the Defense Department. Its sale to the Japanese was considered a threat to 'national security', and the US government intervened, sending a clear signal on the limits that the internationalization of the industry should not trespass. Furthermore, citing the Japanese failure to comply with the market-sharing agreement, the US government imposed unprecedented trade sanctions against Japanese electronic goods, opening a 'trade war' across the Pacific. Few months later, the Fairchild case ended with its acquisition by the US company National Semiconductor (Time, 14 September 1987, p.37).
The intervention of the US government in support of the domestic chip producers gave new weight to the project of the Semiconductor Industry Association, the US trade group, for creating a Semiconductor Manufacturing Technology Corporation (Sematech) along the lines of the Microelectronics and Computer Technology Corporation (MCC) described in the previous section. All large US manufacturers of semiconductors would join in a major programme for developing the manufacturing system of the next generation of chips. The $1 billion needed for the project may come from the new funds the US Defense Department is prepared to spend in support of American semiconductor firms, and an initial funding of $100 million a year was approved by Congress early in 1987 (Business Week, 20 April 1987, p.63).
This project would dramatically expand inter-firm co-operation in the US, that is presently limited to the Semiconductor Research Corporation, a non-profit consortium of thirteen companies funding, with $35 million a year, university research on advanced integrated circuits (The Economist, 23 August 1986, p.13; see also Pianta 1988).
The lessons are that a new phase is now opening for the semiconductor industry; a much greater role will be played by inter-firm co-operation and by the state, not only in Japan and Europe, but especially in the United States, in controlling and subsidizing the industry, negotiating market shares and directing technological strategies, in an industry where the corporations' strategies had led to rapid internationalization.