Hi GM.....Correction on my citing of AMAT's closing price, it closed a tad shy of 70.......Here's an article from today's IBD, entitled "Can Japanese Chip Firms Spend Way Out of Slump?"
Judging by the numbers, it looks as if U.S. chipmakers have rallied to turn the tide against rivals in Japan over the last decade.
U.S. chipmakers grabbed 44.9% of the $142 billion chip market in '96, up 5% from a year earlier, says San Jose, Calif.-based Dataquest Inc. And the worldwide market share of Japan's chipmakers is down 15% from '88.
Yet it's risky for U.S. chipmakers to get cocky, industry analysts say.
''It's a long-term competitive conflict,'' said Kenneth Flamm, senior fellow at the Brookings Institution, Washington, D.C. ''We're sitting pretty now, but things could change.''
Japan's chipmakers are mounting new research-and-development efforts, especially in manufacturing, Flamm says.
U.S. chipmakers hold an edge in intellectual property, other industry analysts say. But Japanese companies are making key alliances, and they're bearing down on emerging markets for complex devices that combine multiple functions on a single chip.
Japanese firms need to diversify. They still rely heavily on standard memory chips, called dynamic random-access memories. In '95, DRAM chips accounted for 35% to 45% of their worldwide sales, says Scottsdale, Ariz.-based market research firm Integrated Circuit Engineering Corp.
Prices for DRAMs plummeted in '96. So Japan's chipmakers are trying to switch gears.
''I'm a bit cynical,'' said Yoshihiro Shimada, an analyst with Dataquest's Tokyo office. ''When the DRAM market crashes, Japanese companies always say they have to move to more profitable markets. Maybe this time will be different with system integration and application-oriented products.''
Japanese chipmakers emerged as a global force because of government-supported research and development in the '70s and '80s.
At the Brookings Institution, Flamm says major Japanese R&D programs are under way again. The goal, he adds, is regaining a manufacturing edge that eroded during the '90s.
One program is called Semiconductor Leading Edge Technology Inc. The program has an annual budget of $70 million.
It is developing technology for making chips using 12-inch wafers. Most chips today are made using 8-inch wafers. The larger-sized wafers yield about 2 1/2 times more chips.
''The Japanese government and industry together have joint programs that add up to somewhere between $180 million and $200 million a year,'' Flamm said. ''They're trying to regain the high ground in semiconductor manufacturing.''
Worldwide market share of Japanese chipmakers dropped to 35.9% in '96, down from 40.1% a year earlier, says Dataquest.
Japanese chipmakers peaked in '88 with 51% market share, says the market research firm. In '93, their share sank below that of the U.S. for the first time since '85.
In '96, several factors jolted Japan's chipmakers, says Wilfred Corrigan, chairman and chief executive of LSI Logic Corp.
''They had the yen (valuation) going against them, they had the DRAM market going against them and they had enormous growth in the microprocessor business going against them,'' said Corrigan.
Milpitas, Calif.-based LSI Logic has been one of the U.S. chipmakers able to compete in the consumer electronics market with Japan.
''They've taken some lumps, but they're still formidable,'' Corrigan added. One big reason for Japan's shrinking market share is Korea's DRAM makers. They invested heavily in manufacturing in the early '90s.
Analysts agree that the microprocessor market, dominated by Santa Clara, Calif.-based Intel Corp., is another sore point. To combat Intel, Japanese chipmakers licensed reduced instruction-set computing, or RISC, processor technology. While built into many consumer electronics products, RISC has had a tough time making inroads in the PC market.
''The Japanese have never figured out how to get into Intel-compatible markets,'' said Linley Gwennap, editor of The Microprocessor Report newsletter, based in Sebastopol, Calif.
Gwennap adds, though, that Japanese vendors are licensing new multimedia chips that process graphics and video. He points to Toshiba Corp.'s deal with privately held Chromatic Research Inc. in Sunnyvale, Calif.
San Jose, Calif.-based Cypress Information Resources Inc. tracks intellectual property among chipmakers. Mark Stansberry, a Cypress analyst, says Matsushita Electric Industrial Co. and Mitsubishi Electric Corp. have been active in licensing deals.
When licensing chip designs, Japanese companies try to leverage their manufacturing prowess. But they're designing more chips of their own, too, at large R&D centers.
One yardstick of their efforts: technical papers presented at the chip industry conferences. At the International Solid-State Circuits Conference in recent years, Japan's chipmakers strutted out many papers for multimedia chips, digital signal processors and system on a chip.
Chipmakers such as NEC Corp., Toshiba, and Fujitsu Ltd. are focusing on system-on- a-chip designs.
While system on a chip is becoming a catch-all phrase, most often it refers to chips built for specific customers. These chips also are called application-specific integrated circuits.
''Japanese companies will try to have clear technology leadership in ASIC,'' said Dataquest's Shimada.
NEC expects system on a chip to become the company's core semiconductor technology. It is targeting mobile communications and computing, says Hiroshi Nakashiba, a senior manager at NEC.
In April, NEC said it will spend more than $3.1 billion over the next three years to support its system-on-a-chip efforts.
But overall, Japan's chipmakers slowed capital spending as a percentage of sales in the mid- '90s. They spent $11.2 billion on chip plants and equipment in '96, down from $12 billion in '95, says Dataquest.
North American chipmakers' capital spending rose to $17.2 billion in '96, up from $13.8 billion in '95. Korea's chipmakers spent $7.3 billion in '96, up from $5.8 billion in '95.
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Copyright (c) 1997 Investors Business Daily, All rights reserved.
Investor's Business Daily - Computers & Technology (05/20/97)
Can Japanese Chip Firms Spend Way Out Of Slump?
By Reinhardt Krause |
