Japan Agrees To Open Market to US Computer Chips

By , Staff writer of The Christian Science Monitor

IN their competition to be world leader in the key technology of microchips, Japan and the United States have struck a new bargain on the rules. The Japanese government agreed to help American firms obtain 20 percent of Japan's semiconductor market - the largest in the world - by the end of 1992. The US in return will suspend $164 million in economic sanctions against Japanese electronic companies.

A vague goal of 20 percent market share for US companies had been made by Japan in a 1986 agreement but, by US estimates, the share only rose to 13.2 percent last year from 10.1 percent. That pact was due to expire in July. The US imposed sanctions when Japan failed to make progress on market access.

The new pact, finalized June 4, grants Japan another two years to help foreign firms reach an unambiguous target of 20 percent, while the US retains the right to reimpose sanctions.

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"Now we get explicit mention of the 20 percent in the agreement," says Ron Bonham, spokesman of the LSI Logic Corp. The previous pact had the goal in a side-letter.

Japan was not eager to renew the pact, but was under US pressure to make concessions, especially after the Gulf war highlighted the US military's increasing dependence on Japanese technology.

"It is regretful to see that the 20 percent semiconductor purchasing target is still included in the new agreement," said Tomihiro Matsumura, executive vice-president of NEC Corp., the largest computer company in Japan.

By being given an official leg up in Japan's market, US firms hope they can be more competitive and retake lost share in the US and global markets. In the last couple of years, the two governments had helped set up "user committees" between their two industries as a way to encourage microchip sales.

The US semiconductor industry sought a higher target than 20 percent, but industry officials say they are satisfied with the new pact. The US stance was helped by a joint approach to the issues worked out last fall between the US computer and semiconductor industries.

"Once we reach 20 percent, we will be integrated into the Japanese economy enough that the momentum would be there to increase the market share even more," said Tom Beermann, spokesman of the US Semiconductor Industry Association.

The new deadline of 1992 to reach 20 percent will come during the next US presidential race, thus it is likely to raise the pressure on Japan to meet the target, say US officials.

Japan and the US failed to agree on how to measure market share, but the US made clear that it will judge the pact by its own standard.

The pact differs from other US-Japan trade agreements by dictating market share in what is called a "managed trade" approach and also puts the US in the position of encouraging the Japanese government to intervene in domestic markets, something that the US has normally tried to prevent.

But such steps were justified by the Republican White House to correct past closure of Japan's microchip market and to help stop alleged dumping of Japanese semiconductors.

The 1986 pact succeeded in ending Japanese dumping of microchips on world markets, and the 1991 pact sets up faster procedures to spot and prevent its recurrence.

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