Microchip Agreement Reflects Reduced Concern Japan Doesn’t Dominate Industry Anymore

The U.S. computer chip industry’s decade-long government guarantee of a market in Japan has ended - but few in the industry care.

Two days past a deadline, U.S. trade negotiators on Friday yielded to Japanese demands that the U.S. government back off from oversight of Japanese chip imports.

While a setback for U.S. hopes to press import targets on Japan in other industries, it will make no difference in the burgeoning electronics industry, which has become too complex to be regulated by bilateral trade agreements.

Things are far different from August 1986, when the United States threatened duties and sanctions against Japan if it didn’t start using more computer chips from other countries.

Japan agreed then to import 20 percent of its chips but took years to meet the target. But now one-third of the semiconductors used by Japanese manufacturers come from other countries. About a fifth come from the United States.

Economic forces make a return to Japanese self-reliance in computer chips inefficient and unlikely.

A key reason is the rise of personal computers, stuffed with chips from the United States and South Korea. But PCs and bigger computers account for only about half the market for semiconductors. From automobiles to greeting cards, computer chips are in so many products that Japan can’t make enough to satisfy its own need.

“The market is sufficiently competitive and any trade barriers would likely be self-defeating,” said Troy Eid, executive director of the National Information Infrastructure Testbed, a Denver-based coalition of technology companies.

Meanwhile, Taiwan, China and other countries have also become prominent in chipmaking. And companies are aligning across borders.

“This business is getting so expensive, one company can’t do it all alone,” said Tetsuya Kataoka, senior research fellow at the Hoover Institution in Palo Alto, Calif. “It makes a bilateral agreement basically irrelevant.”