Advanced TV's lessons for US R&D

HIGH-DEFINITION television (HDTV) has itself been in the limelight recently. The reason is clear: It will form the foundation of the next era in consumer electronics, launching spinoff industries destined to, as Rep. Mel Levine (D) of California notes, ``dwarf'' the existing industry. That is a significant observation, shared by seasoned observers in telecommunications. In 1970, the United States held on to 100 percent of consumer electronics worldwide. Today, this $60 billion-plus ``pie'' has witnessed American shares drop to a paltry 5 percent.

We know what happened when Japan Inc. and the US were rivals in autos, and in semiconductors. There was no skirmish in VCRs; the US lost by default when it abandoned production altogether.

Will those defeats - with their inexorable tendencies to further ``hollow'' the shell of our manufacturing base - be repeated?

Electronics industry spokesmen are rightfully concerned. Zenith, the last ``Made-in-the-USA'' TV maker, is considering purchase offers of its television division by Korean conglomerates. Furthermore, America has lost its distribution and marketing systems in TV.

Our industry is where it was in the 1950s, which is when the current 532-line definition came into vogue. With replacements of existing units inevitable around the world, and with the promise of ultrasharp pictures a highly attractive marketing tool, we should be concerned.

HDTV, with more than 1,000 scan lines making up the picture, is far more than near-lifelike images on the screen. It is seen as a battleground, with $300 billion to $500 billion worth of consumer products (more than double the amount of the present global telecommunications market) at stake. A wide range of products - electromedical devices, graphics screens, and such - are allied to breakthroughs in this field. Spinoff products, including new chips, will provide other far-reaching multiplier effects.

This is hardly a theoretical threat. The Tokyo-based NHK network will unveil HDTV models in 1990.

HDTV was largely the result of US technology. Japan plunged into the arena, spent $300 million to $700 million since the early 1970s (10 times the level of America's uncoordinated efforts), and forged ahead. In Japan Inc., corporations there have - in the cartel-like style witnessed in other arenas - once again played hare to our tortoise.

How did we allow this to happen?

The US's research and development was never allowed to maximize its potential. ``US science is not the weak link,'' according to Bruce Merrifield, assistant secretary of commerce for innovation, technology, and productivity. ``Product development is.''

Too many impediments remain in the way of R&D. Some stem from government, such as a system that places steep taxes on capital gains, while ending investment tax credits for productive equipment. Other industrial countries impose far more liberal depreciation criteria on their own manufacturers.

There is blame for private business. Quarterly reports - with their shortsighted emphasis on short-term goals - are judged on amounts in the retained-earnings column. Spending for R&D competes with retained earnings. This is a terrible way to direct research, or to plot successful commercialization of that R&D.

The quarterly report, like the tax system that cripples entrepreneurialism, were born of an Industrial Age whose paradigms are no longer meaningful. Reduced product life cycles as well as high up-front investments are but two of the features of the Post-Industrial Era.

It is no mystery as to why opportunities for the HDTV prize evaporated on this side of the Pacific, and why Japan Inc. - whose tax and stock capitalization mechanisms stress a long-term agenda - appears far out front.

During the few years when research and development limited partnerships (RDLPs) flourished, perhaps half the nation's risk capital emerged from this single device. RDLPs, a brainchild of Dr. Merrifield, were treated as new net funds of start-up companies and on corporate balance sheets alike. Their characteristics made them anathema to the casino-game mentality of our financial system.

That system could be an underpinning of dynamic manufacturing. Today, it hinders strides toward competitiveness, especially in technology-based sectors where initial R&D outlays are costly.

When the hoopla of this election campaign dies down, victors must develop tools that allow farsighted businesses to think and act long-term. Options abound: consortia, bolstered RDLPs, and a pro-R&D tax code. Only then will an economic renaissance occur.

Julian M. Weiss is Washington, D.C. correspondent for Japan Journal and writes for leading business magazines. Mac Horino is a former correspondent for Japan Economic Journal.

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