The American Semiconductor Industry and the Ascendancy of East Asia

These nations comprise the Association of Southeast Asian Nations (ASEAN). Brunei the final member of ASEAN, does not host any semiconductor facilities at this time.

Semiconductor production can be divided into a four step process: Design, fabrication, assembly, and test. In the design stage, the intricate pattern of components and connections is drawn and reduced onto masks. These masks are then used in the fabrication stage to photographically etch and deposit layers of various materials in the predetermined pattern onto wafers of silicon. The completed wafers, currently up to six inches in diameter, can contain hundreds of semiconductor devices called “dice” (or “die” in the singular). After an intermediate test stage in which the bad dice are marked, the wafer is scribed and cut into individual devices, and the bad dice are discarded. In the assembly stage each die is packaged in plastic or ceramic, thin wires are bonded to the die and the package is finally sealed. The packaged device is easier for customers to insert in printed circuit boards or final products. After the final test stage, the semiconductor device is ready to be delivered to the customer.

Drucker Peter , Managing in Turbulent Times (New York, NY: Harper & Row, 1980), p. 95.

Finan William , “International Transfer of Semiconductor Technology Through U.S.-Based Firms,” Working Paper #118 (New York, NY: National Bureau of Economic Research, December 1975), p. 58. It should be noted that U.S. firms also established a number of facilities, including fabrication plants, in Europe. Europe has maintained a 17% duty on semiconductors, and U.S. firms found they had to locate in Europe to get behind the tariff wall. Only one U.S. firm, Texas Instruments, was successful in establishing an effective market penetration plant in Japan. In exchange for the right to open a facility, TI agreed in 1968 to license its strategic integrated circuit patents to Japanese firms and keep its share of the Japanese IC market to less than 10%. See Tilton John E. , International Diffusion of Technology: The Case of Semiconductors (Washington, DC: Brookings Institution, 1971), p. 146.

These figures represent “merchant sales” only. Merchant producers are those who manufacture semiconductors for the open market, as opposed to “captive” producers who manufacture semiconductors for their internal needs. IBM is the largest captive producer, followed by AT&T.

The production workers in virtually all of the Asian plants are females between the ages of 16 and 22. A local Hong Kong law which prevented females from working from midnight to 6:00 a.m. led one firm to experiment with males on this shift, but the practice was abandoned because the men did not achieve acceptable quality levels.

Grunwald Joseph Flamm Kenneth , The Global Factory (Washington, D.C.: Brookings Institution, 1985), p. 85.

Integrated Circuit Engineering Corporation, Status 1984—A Report On The Integrated Circuit Industry (Scottsdale, AZ: I.C.E., 1984).

Numbers based on unpublished SIA estimates.

“Challenge only Beginning in Semiconductor Industry,” Business Korea (August 1984), p. 31.

CMOS (Complementary-Metal-Oxide-Semiconductor) is a state-of-the-art process. The lower power consumption of CMOS makes it the preferred process for ICs used in digital watches and pocket calculators.

Speech by Drexel Charles (President of Tylan and Chairman of the Board of the Semiconductor Equipment & Materials Institute), “Chip Equipment Makers See Relief,” San Francisco Chronicle, May 22, 1985, p. 27.

A Competitive Assessment of the U.S. Software Industry, U.S. Department of Commerce, International Trade Administration (December 1984).

Semiconductor Industry Association, The Effect of Government Targeting on World Semiconductor Competition (San Jose, CA: SIA, 1983); and the Semiconductor Industry Association trade action, Wolff A. , Japanese Market Barriers in Microelectronics: Memorandum in Support of a Petition Pursuant to Section 301 of the Trade Act of 1974 (San Jose, CA: SIA, 1985).

The hybrid approach proposed by MITI in 1984 would have been a departure from the international norms for length of protection and extremely limited compulsory licensing situations contained in the current copyright treaties, and it would have invited other nations, particularly from the developing world, to make even more serious departures from the agreements.

The Coordinating Committee is now comprised of the NATO countries (minus Iceland and Spain) and Japan.

Kojima Kiyoshi , Japan and a New World Order (Rutland, VT: Charles E. Turtle Co., 1977), pp. 75–89.

Rappa Michael , “The Cost of Capital in the Japanese Semiconductor Industry,” California Management Review (Winter 1985), p. 85.