Japan's chip producers had invested an enormous amount in 1984, spending enough on capacity expansion to bring on the U.S.-Japan Semiconductor Trade Agreement the following year.

Besides problems with trade friction and a doubling in the value of the yen, demand tanked in the mid-1980s. As the PC market paused to catch its breath, Japan's chip industry lost a collective $4 billion during the '85-86 downturn. By 1988, however, demand returned with a vengeance. Spurred by the workstation market, a 1-Mbit DRAM sold for $19 in Japan and more on overseas markets.

Just think about that for a second. A 128-Mbit DRAM sold for about $1.90 not long ago.

Of course, none of the managers running Japan's Big Six expected DRAM prices to stay that high. But they did believe that the good times would get even better. HDTV sets-then selling for $8,000 each-were thought to be on the cusp of mass acceptance, and others looked forward to Japan's capturing one-fourth of the worldwide 32-bit processor market.

Listen to Tomihiro Matsumura, who ran NEC's chip division throughout the 1980s. He was impressed with how many expensive cars were being sold in Japan then, and said, "People are saying that an HDTV culture will emerge in Japan. Printing companies are working on it, so if you see something on HDTV, you can make a hard copy of it. Nowadays there are a lot of people with extra money to spend."

Tsuyoshi Kawanishi, the charismatic leader of Toshiba's semiconductor division, was really in clover back then, since Toshiba had managed to tame CMOS earlier than its rivals in the DRAM business. Kawanishi thought that the 4-Mbit DRAM generation would usher in "revolutionary applications"-storing music and voice in memories, for example, and combining CCDs with DRAMs for capturing video images that could be quickly printed out.

The confidence of that era has been lost, of course. In Japan, quasi-government control resulted in high costs and poor competitiveness. The lack of international standards for digital television and the ongoing battles over copyright protection for digital video and music content providers have stalled the dream of an "HDTV culture."

But the dream lives on. Perhaps Japan's leaders had the right vision, just 15 years early.

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