America's high technology can be had for a song. Or so think the Japanese. Last week, Fujitsu Ltd. announced plans to merge with Fairchild Semiconductor Corporation, a division of New York-based Schlumberger Ltd. The price: about $250 million for an 80 percent stake in the company, which analysts figure is a bargain for one of this country's cutting-edge technology firms.
Some observers, like Brian Wynne at the American Electronics Association, consider the deal ``on the scary side in its implications.''
Others are not convinced the Fujitsu deal spells a trend. ``We may see one or two or three more,'' says Kenneth Flamm, a technology specialist at the Brookings Institution, ``but we won't see Japanese flags planted all over Silicon Valley.''
Still, the stakes are sufficiently high that the proposed merger is sending shivers through Silicon Valley and the Defense Department. Ultimately, semiconductors, the ``brains'' of computers, are the key to America's defense technology and its ability to compete in the world consumer market.
Their strategic value has not, however, insulated US semiconductor companies from fierce price cutting and a prolonged market slump, which have battered down their stock prices (see chart), making them vulnerable to takeovers.
And the Japanese are in the best position to buy. On top of the depressed stock prices, the dollar's 40 percent decline makes them even cheaper in yen terms. And while price slashing has taken its toll on the earnings of Japanese companies, the big players are so diversifed that they can absorb it.
Japan's top chipmakers -- NEC, Hitachi, and Toshiba, which ranked Nos. 1, 4, and 5 in the world last year -- make money hand over fist in consumer electronics. America's biggest chip companies don't have such a cushion.
Then there's the political issue. Last summer, amid charges of dumping semiconductors on American soil at below-cost prices, the Japanese agreed to sell semiconductors at ``fair market value.'' But that agreement appies to imports only.
``If their manufacturing and assembly is here, they're untouchable,'' notes Dr. Flamm. ``Clearly the Japanese are moving into the US to get around creeping protectionism.''
Now people in the industry are looking around and wondering who's next.
It's ``widely known'' that General Electric wants to sell RCA Semiconductor, which it bought along with the rest of RCA last spring, says Rick Billy, an analyst at the Gartner Group. GE officials won't comment.
Advanced Micro Devices, which chalked up a $37 million loss last year and may triple that figure this year, is probably looking for a buyer, Mr. Billy says. ``They'll have to sell themselves at a fire-sale price,'' which could slow the process, he says. ``But they certainly need help.''
A third possible target, Flamm says, is National Semiconductor, since it is in financial trouble and has advanced chip technology. If the announcements coming out of Tokyo in the last week are any indication, that is of keen interest to the Japanese.
At present the Japanese have a lock on high-volume, low-tech memory chips, which store information. Their manufacturing technology is far ahead of the US, analysts say, which means that Japanese companies can make memory chips that are more reliable and less expensive than American companies can.
But the US is ahead in design technology. Japan has been forced to license designs for more sophisticated chips that process information, called microprocessors, from the likes of Motorola, Intel, and National Semiconductor. Of late, American companies have been reluctant to play ball with their rivals.
One way for the Japanese to deal with this problem is to buy the chip designers. Fairchild, for example, has a very fast 32-bit microprocessor.
Another way is for the Japanese to develop the microprocessors themselves. Three days after the Fujitsu-Fairchild merger plans were announced, Fujitsu said it was working with Hitachi to develop a 32-bit, and eventually a 64-bit, microprocessor.
``It's a one-two punch'' by Fujitsu, says Howard Bogert, computer analyst at Dataquest, a market research firm. ``They're developing the technology, and now they have more places to go with it because of Fairchild.''
If other Japanese companies like Toshiba and Hitachi follow Fairchild's lead, American computermakers may find themselves with a dilemma. For example, Fairchild sells semiconductors to Cray Research, which competes head on with Fujitsu in making supercomputers. Mr. Wynne at the American Electronics Association worries that such mergers would reduce the number of suppliers for US computer companies.
That wouldn't necessarily affect the IBMs and Digital Equipments of the world, since they make many of their own computer chips. But it could pinch the small cutting-edge computer companies, says Flamm, such as Convergent Technologies Inc.
Most analysts, though, think it will be some time, if ever, before the Japanese can overtake their American competitors in the high-end chip as they did in the memory chip. They say the Defense and Justice Departments would not let foreign companies pick off America's cutting-edge companies, many of which are defense contractors.
Besides, mergers across the Pacific could be just what American companies need, says Mr. Bogert. They would give the Americans the manufacturing technology necessary to survive in the consumer market. They could pare down overcapacity in the industry and make it profitable again. Even the Pentagon might benefit, he says: ``There are some things Fujitsu does that might be handy for the DOD to know about.''