How the United States destroyed Japan's chip industry!

In the 1980s, the United States fought a chip war with Japan and eventually destroyed Japan's chip industry. Huang Shudong tells us such a wonderful story in "The Rise and Fall of Great Powers".

In the 1950s and 1960s, when American electronics manufacturers were selling electronic products to Japan, Japan had almost no electronics industry. So Japan decided to catch up. In the 1970s, Japan began to compete with the United States in the electronics industry. Its products were high-quality and low-priced, and were very popular among American consumers. The US electronics industry was severely hit, especially the chip industry, which even suffered a large loss, so the United States decided to counterattack.

The secret to the rapid rise of Japan's electronics industry is: strict market protection, the cultivation of large and comprehensive electronics consortiums, and the government's promotion of technology development and cooperation in national industries. With the rise of leading companies such as Panasonic, Hitachi, and Sony, the share of Japanese companies in the international market has risen sharply. Japanese electronic products have swept the world and began to challenge the United States worldwide. More than 20 years later, Silicon Valley electronics companies that dominated the world had to turn their attention to the US government in order to save their own lives. In March 1977, the Semiconductor Industry Association (SIA) of the United States concluded that the success of Japan's electronics industry was the result of dumping in the United States. In order to maintain the competitiveness of the US electronics industry, the US government must intervene in this dispute. The US government agreed with the SIA's position. An industrial war led by the US government around the chip industry began.

To understand this industrial war, we first need to understand the strategic position of the US government on high technology. The monopoly of high technology is the cornerstone of US hegemony. The electronics industry, especially the chip industry, is the jewel in the crown of hegemony and has great strategic significance for national security. Some interest groups in the United States believe that since Japanese chips are of high quality and low price, from the perspective of international division of labor, the United States should allow its ally Japan to become its chip provider, which is also beneficial to American consumers. From the perspective of comparative advantage, since chips are no longer an advantageous industry for the United States, they should be abandoned.

In view of the great significance of high technology to the US defense, the US Department of Defense set up a special group to study this issue. Later, a report was released to answer the question of the dependence of the US defense on foreign chip technology. The report pointed out that all the advanced weapons systems of the United States are built on extremely advanced chip technology. Chips are the key to determining the leading position of electronic products, and competitive production scale is the key to determining the leading position of chips. The production scale of the chip industry must be supported by the commercial market, so the United States must protect the commercial market of the chip industry.

The key to this report is the priority it places on economic interests and national security interests. In a country's industrial strategy and trade strategy, national security interests override any economic interests. Dealing with key industries purely from an economic perspective and from the perspective of international division of labor is an act that disregards the long-term safety of the country. In national games, what is needed is a strategist who defends national interests, not an accountant who only calculates short-term benefits. If the United States gave up its chip industry at that time, there would be no chip manufacturers like Intel in the United States today, and the United States would be completely dependent on Japan for computers and defense systems! Dependence on others will inevitably be controlled by others. Is it still hegemony if you rely on others' hegemony? !

What is particularly serious is that if Japan's chip technology is obtained by the Soviet Union, it will pose a fatal threat to the hegemony and security of the United States. There is no choice on the issue of national security. The United States decided to vigorously crack down on the Japanese chip industry and vigorously support the American chip industry. The US Department of Defense played an important role, providing research funds, increasing orders on a large scale, and so on.

The US strategy in this industrial war has a process of formation from "anti-dumping" to all-round. In March 1982, the US Department of Commerce stated that it would investigate the cheap dumping of Japanese chip manufacturers in the United States. The Japanese Ministry of International Trade and Industry immediately issued export guidelines, requiring automatic reduction of exports to the United States and automatic increase of export prices to the United States. In June, the US Department of Justice informed the Japanese Ministry of International Trade and Industry that they were investigating Japanese manufacturers for using cartels and other means to limit quantities and increase prices in the US market. In short, no matter what Japanese manufacturers do, the United States has an excuse to strike. The two sides set up a high-tech working group and reached an "Agreement on Principles" in November.

This agreement is a broad and pragmatic agreement that confirms the importance of free trade and calls for equal national treatment for each other's enterprises to enter each other's markets. This agreement was easily agreed by the Japanese side. The US's purpose was very clear and limited. At that time, the US and the Soviet Union were competing for hegemony, and the US needed Japan, so it could not damage its alliance with Japan, but at the same time it had to hit Japan's leading position in the electronics industry.

This seemingly fair agreement in principle actually has deep strategic thinking. As mentioned earlier, the historical experience of the development of Japan's electronics industry is market protection, a self-sufficient corporate system and strong government promotion. Therefore, this agreement in principle actually directly hit the core of Japan's electronics industry. Japan made an important strategic concession unconsciously. This concession suddenly made the Japanese electronics industry, which was at its peak, lose its solid foundation. With this strategic failure, all future tactical failures were already expected by the United States.

Since the Reagan administration, the main tactic of the US economic war against Japan has been "peeling the onion". First, a principled opinion is put forward, and the key issues are often glossed over. After obtaining Japan's approval, specific suggestions on key issues are put forward based on this principle. This is a typical example of "peeling the onion".

Starting with "empty talk" and establishing a long-term strategic foothold is the experience of the United States in its game with many countries. Take China's WTO accession negotiations as an example. China negotiated for more than ten years. What did it talk about? Later, the Chinese officials who led the negotiations revealed that they talked about four words: "market economy". "Market economy" seems to be empty talk, but once it becomes the principle basis of the negotiations, China's economic system, China's industrial protection, market protection, etc. all become the content of the negotiations. All the unequal concessions made by China later are in these four words.

After Japan accepted the principle of market access, the United States began to need details. Japan had to agree to abolish all chip tariffs and open up its domestic market. However, despite this, the share of the US electronics industry in the world market continued to decline. In 1985, Japan replaced the United States as the world's largest chip producer. The American company HP publicly pointed out that Japanese chips are indeed high-quality and low-priced, and the proportion of Japanese problematic chips is only 10% of that of American chips. However, this industrial war was not really an economic reason from the beginning. The strategic goal of the United States was to maintain the United States' long-term monopoly in the chip industry. The national interests and industrial interests of the United States are completely consistent here.

By the spring of 1985, the U.S. chip industry believed that if the government did not take drastic measures quickly, the entire chip industry would perish in the competition with Japan. After intense debate, SIA unanimously agreed to take drastic actions against Japan. In June 1985, SIA filed a lawsuit with the Office of the United States Trade Representative against the dumping of Japanese electronic products. This was the famous Section 301 lawsuit. The lawsuit pointed the finger directly at the Japanese government.

For the US government, the core of deciding this case is national security interests. The then US Trade Representative Yut wrote in his memoirs: "Our (chip) technology and quality are not better than Japan's, and may be worse. However, we... cannot afford the consequences of (the United States) losing chip production capabilities. The chip industry is key to the future of the United States. If you lose (chip capabilities) you will become dependent on others. As a world leader, can the United States rely on others? Our judgment is: No."

The first thing that the trade representative considers is not comparative advantage, but the security interests of the United States. National security is above all else, and the game between major powers calls for such trade representatives. From this perspective, China's decisions in the 1980s on large aircraft, computer industry, and opening up China's defense industry did not reflect security strategies. In the game between countries, short-term economic interests are considered more, and national security interests are considered less; free trade is superstitious, and technological and industrial independence is less.

Just as the US government was thinking about its decision on Japan, a series of reports that later had a great impact on US policy appeared in the US. These reports claimed that there was a shadow "Nine-member Committee" in Japan. They met regularly to decide chip prices, market share, etc. Japan firmly denied the authenticity of these reports. The US government has never confirmed the authenticity of the "Nine-member Committee". National games are a mixture of reality and fiction. Different interests require different facts. The strong make bold assumptions, while the weak carefully seek verification.

Faced with a series of pressures, the Japanese government began to back off. In September 1986, the two countries signed the Semiconductor Treaty. The main provisions are as follows: 1) The Japanese government must stop dumping not only in the US market, but also in other markets (opening the way for the US to occupy other markets). Japanese manufacturers must keep detailed cost records to determine the "fair price". Japanese manufacturers can be higher than but not lower than the "fair price". 2) American companies will obtain 20% of the Japanese market share.

This treaty marked the beginning of the decline of Japan's chip industry. The chip industry is an industry with a fast update and a short growth cycle. Since old products cannot be sold below cost, the product cycle is extended. In addition, this treaty caused Japanese chip manufacturers to kill each other, and the previous cooperation in the industry chain disappeared.

In order to avoid unhealthy competition among Japanese companies, Japan's Ministry of International Trade and Industry set a unified minimum price for exports. This policy was immediately countered by the US chip industry. In March 1987, the US government decided to impose a $300 million import restriction on Japan on the grounds that Japan did not implement the agreement. The restrictions included Japanese-made televisions, computers, etc., but not chips. This tactic of inciting the masses to fight against each other is unique. This import restriction lasted until 1991.

When the United States was doing its best to dismantle the industrial alliance of the Japanese chip industry, the Semiconductor Industry Association of the United States obtained government approval and established the "American Semiconductor Manufacturing Technology Strategic Alliance" composed of 14 American chip manufacturers. This alliance will use industrial funds and government funds to develop new technologies. At the same time, the sharp appreciation of the yen directed by the United States forced Japanese manufacturers to significantly increase export prices.

In 1992, the US chip industry regained its lost market share and became the world's largest chip exporter together with Japan. At the same time, the goal of 20% in the Japanese market was achieved. In 1993, the United States replaced Japan and became the world's largest chip exporter again. In 1994, in order to get rid of the shackles imposed by the United States on the Japanese chip industry, when the treaty was about to expire, the Japanese Minister of Trade took the lead in announcing that the treaty had completed its historical mission. However, the United States announced the extension of the treaty, and finally signed a new treaty based on the original treaty.

The United States determined all the topics, time and methods of this industrial war. The United States also used market weapons to cultivate a large number of opponents of its opponents. In the mid-to-late 1990s, chips and electronic products from South Korea and Taiwan began to flood into the US and world markets on a large scale, posing a comprehensive challenge to Japan. The appreciation of the yen caused the prices of Japanese electronic parts to soar, and Japan had to transfer the production of parts overseas. The traditional industrial chain within the Japanese consortium was broken, and the Japanese electronics industry as a whole has never been prosperous since then. Later, the long economic recession caused Japan's electronics industry to decline. Entering the 21st century, not only the chip industry, but also Japan's entire high-tech industry has been left far behind by the United States. Sony, Sanyo and others are struggling to survive in losses.

Source: The content comes from "Fengwen", author is Dongfang Shuo, thank you!