How quickly we forget. Born in fire, the once-contentious, U.S.-Japan Semiconductor Agreement dies at the end of July without even a whimper.
Spawned 13 years ago in the thick of the trans-Pacific chip trading war, the twice-renewed, bilateral pact has been credited with opening up the Japanese semiconductor market to foreign suppliers.
The often-tempestuous pact undoubtedly made some difference in U.S.-Japan chip trade. It did yank the reins of the Japanese government to get it to put the heat on recalcitrant "Buy-Japan" chip customers in that country. During the first decade of that agreement, the two countries dutifully released quarterly tallies of the foreign share of the Japanese chip market. That kind of publicity ratcheted up the pressure on Japan to boost what was originally an abysmal foreign market share.
But the agreement got more credit for building the Japanese chip business of foreign companies than it probably deserved. Biggest reason for the foreign market share soaring to a hefty 37% last year was due to the booming imports of Pentium microprocessors from Intel Corp. going into Japanese-made PCs.
Japan Inc. had no choice but to buy the Intel chips. Japanese chip makers had failed several times to develop home-grown microprocessors for the world market.
Local consumer electronics manufacturers, after claiming for years that the U.S. couldn't produce chips for their products, increasingly were forced to buy "Made-in-America" digital chips that they couldn't get locally. The same scenario held true for graphics and PC core logic chip sets, as well as a host of ancillary digital logic and telecommunication chips that were also developed in the U.S.
At the same time, the Japanese chip business, which was tied closely to the imploding DRAM market, had taken it on the chin in recent years. Restrained by available capital investment, many Japanese chip makers rushed to Taiwan foundries for production help and tightened up their domestic operations.
This Japanese retrenchment has allowed the once-vaunted bilateral semiconductor agreement to die in silence. Almost no one cares anymore. It undoubtedly would astonish a high-tech Rip Van Winkle to learn after a 13-year sleep that the fiery chip pact of 1986 is now a non-sequitur.
The chip treaty left its legacy, though. That is the World Semiconductor Council (WSC). The global body of national or regional industry trade associations originally was proposed by Japan as a diversionary tactic during heated negotiations to extend the pact in 1996. Just as the bilateral chip treaty was expiring, the WSC was given new life by being rechartered by governments of the five leading chip making areas.
It remains to be seen, however, whether the WSC can become an effective, take-charge working body or atrophy instead into yet another global debating society. The outlook is not good. The council has a history of ducking many of the divisive semiconductor issues. It avoided setting global standards for chip dumping regulations, or safeguards that would stop rescue funds from the International Monetary Fund from being used by South Korean banks to bail out that country's chip makers.