The Rise and Fall of Japanese Semi-Conductor Industry

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CASE 1 THE RISE AND FALL OF THE JAPANESE SEMICONDUCTOR INDUSTRY, 1970-2001 Executive Summary US enterprises dominated the world semiconductor market from the 1950s until the early 1980s. During the 1980s, however, the market share of US firms plummeted, falling to 29% by 1990, while the share held by Japanese producers rose from 24% at the end of the 1970s to 49% by 1990. By the end of the 1980s the US was a net importer of semiconductors, while 5 of the 10 largest semiconductor producers were Japanese. By the mid-1990s, however, US firms had regain global market share (to 42%) while the Japanese share had dipped to 41%. Japanese industrial policy had a great deal to do with the success of Japanese firms. Japan denied direct access to the Japanese market, and had firms aggressively pursue technology-licensing agreements from US manufacturers. While these agreements were financially attractive for US firms in the short run, they were not these firms’ first choice for accessing the Japanese market, and they resulted in a significant transfer of technology to Japanese firms. As a result of political pressure from US semiconductor manufacturers, in 1986 and 1991 the US and Japan signed trade agreements that attempted to increase free trade in semiconductors. While different interest groups and politicians on both sides of the Pacific clearly have differing opinions on the appropriateness and effectiveness of these two agreements, the US manufacturers did improve their worldwide and Japanese market share during this time period. Of course the increasing strength of the Yen also contributed to this, and South Korean manufacturers made significant inroads in addition. When a global economic slowdown occurred in 200, Japanese firms were hit hard. The Japanese cut thousands of jobs and announced an exit from the DRAM business. Global sales contracted,

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