Semiconductor Trade Agreement

However, future growth in semiconductors could slow, not because of the failure of technological advances achieved through enhanced cooperation in alliances, but simply because of questionable economic viability. The final question is not the physical limit or the greater complexity of future integrated circuits, but whether the industry can afford to manufacture them. Some proponents of trade and government subsidies argue that the semiconductor industry is “strategic,” that is, essential to U.S. national security. Therefore, the argument is that the sector deserves federal funding to maintain its viability. This seems to assume that the U.S. semiconductor industry would disappear completely if exposed to international competition. While it is difficult to imagine a matrix size of 6 square inches, it is even more difficult to imagine the economic feasibility of developing such a matrix, particularly with regard to the necessary capital investments. The investments of semiconductor companies are quite large. Capital expenditure increased by 44 per cent in 1994 to almost $22 billion, or about 20 per cent of global semiconductor sales. When U.S. demand for DRAM increased in the 1980s, Japanese companies filled this gap, not because of unfair business practices, but because of previous investment decisions.

By delaying investment during periods of slow growth in the market, U.S. companies had lost much of their competitive advantage. Now, many of these U.S. companies want the federal government to cover the losses they may have suffered if they have not invested in DRAMs. It is ironic that some of these companies, if they had invested in the production of DRAM, would have sacrificed the greater profits from the production of the largest chips. The third issue is low-cost work. Are general wages in the Samsung semiconductor industry low compared to other companies in Japan and the United States, and even in Korea? Could you also briefly discuss the part of labor as a production factor in semiconductor production? U.S. computer chip manufacturers have complained that the Japanese have not fully complied with the agreement.

They say, for example, that U.S. companies are still not sufficiently in the Japanese market. The Japanese government responded that it had not agreed to guarantee certain market shares at certain times, but only to act in the best possible way to encourage the sale of American semiconductors.