Industrial Competitiveness

March 20, 1987

Report Outline
Special Focus


A few years ago, it would have seemed unlikely that those fiercely competitive makers of tiny computer chips from Silicon Valley would be banding together to save their industry from Japanese domination. These entrepreneurs, whose minuscule chips were giving us everything from hand calculators to cars that could calculate fuel mileage, seemed the perfect American success story. The clean, high-technology plants in sunny California presented a modern alternative to the grimy steel mills that were closing down in the face of cheap Asian steel.

Yet in March 1986, the nation's computer chip manufacturers decided that they would have to pool their resources and appeal for government funds if they were to match Japan's production techniques. After commanding 80 percent of the world market in 1975, the Americans had slipped to less than 50 percent in 1986 and had conceded first place to the Japanese. As for the high-volume, U.S-invented “memory chips,” which store a computer's information, the U.S. share of the world market had fallen from 100 percent to less than 5 percent in a decade.

Ironically, to save itself, an industry that started out in a typically American way, by inventing a product nobody else had, is now looking at a typically Japanese approach—an industry-government partnership focused on manufacturing quality.

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