U.S. calls for Japan to honor chip accord Seeks fewer barriers to American firms

December 29, 1993

WASHINGTON -- The Clinton administration turned up the heat on Japan yesterday in a dispute over computer-chip trade, suggesting Japan was reneging on an international agreement to buy American-made semiconductors.

Lawrence Summers, Treasury undersecretary for international affairs, said during a CNN television interview that Japanese firms discriminate against U.S. suppliers and it is time for Japan to put a stop to the practice.

"I think what we want to see is for them to live up to the commitment that they have made, and that was a commitment negotiated a number of years ago," Mr. Summers said.

A 1986 agreement calls for a 20 percent share of the Japanese market to consist of foreign-made semiconductors. But a U.S. study issued Monday said foreigners supplied only 18.1 percent of semiconductors used in Japan during the third quarter of this year.

Semiconductors are the tiny, sophisticated chips containing instructions that enable computers to perform complex functions.

"They hit the goal that we've both been looking for of 20 percent in 1992 and since then it's been slipping," Mr. Summers said. "That's a matter of real concern for us in the context of an overall relationship that has to be repaired so that the share of the benefits we get is a little higher than it has been in the past."

U.S. Trade Representative Mickey Kantor said he wanted "emergency" talks with Japan over semiconductors and said a joint plan will be proposed to "improve dramatically foreign share and access" to Japan's market.

U.S. companies, long frustrated at what they say are trade barriers in Japan, strongly backed the call for emergency talks to widen the market.

"The numbers are disappointing," said Howard High, a spokesman for Intel Corp., the world's largest chip maker. "It's the third quarter in a row we've shown a decline."

Industry officials said while U.S. chip manufacturers are making market share gains nearly everywhere in the $77 billion worldwide chip market, progress in Japan has been limited by a series of invisible barriers.

"The situation is extremely serious," said Andrew Procassini, president of the Semiconductor Industry Association in San Jose, Calif. "Every effort should be made to correct the current shortfall in Japan's performance."

In Tokyo, Japanese electronics companies said they resented claims that they were not meeting their commitment and insisted U.S. chip makers already dominated the industry worldwide.

One Japanese electronics company official said the argument over market share ignored the fact that U.S. makers had taken back the lead in the world chip industry and were now fully integrated as indispensable suppliers in the Japanese market.

American chip makers are fully aware of this situation, and it is only U.S. government officials who are making an issue of it, he said.

"Big American chip makers are reporting record profits on semiconductor sales, increasing sales both in Japan and on the global market," another official from a major Japanese electronics company said.

In fact, chip sales by American makers here grew much more rapidly than those of Japanese manufacturers in 1993.

Hidehiko Yoshida, chairman of an Electronic Industries Association of Japan committee that monitors foreign semiconductors, said in a statement yesterday that foreign chip suppliers' sales in Japan in the April-September period were up 26 percent, or $4.5 billion, from a year earlier.

"The market share figures do not fully reflect the efforts of Japanese users," said Mr. Yoshida, who is also executive vice president of Toshiba Corp.

But Mr. Summers said Japanese companies actually use numerous methods to restrict purchases of U.S.-made semiconductors. He said the practices are unfair because they thwart competition.

"There are a host of practices that involve if not protection, discrimina

tion," he said, such as Japanese firms' refusal to use products offered by anyone except their traditional suppliers, no matter the quality or price.

"It's that kind of discrimination that we're trying to go after," Mr. Summers said.

He insisted the U.S. share "has not even kept pace" with Japan's expanding market for semiconductors.

"You would think that if the Japanese were working to increase access to American products that the American share of the Japanese market would rise," Mr. Summers said.

"So it's the failure of American products even to keep up with growth of the Japanese market that is so disappointing."

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