From “The Intel Trinity” and
Meanwhile, Japan’s Ministry of International Trade and Industry, in concert with Japan’s major banks (an arrangement illegal in the United States) helped the Japanese electronics companies embark on a massive program of tracking US patent filings in order to anticipate where they were going and beat them to the punch. The ministry provided subsidies (illegal under international law) to help Japanese companies sell their chips at artificially low prices in the United States while keeping prices high at home. In 1978, forty thousand Japanese citizens made technology-related visits, many of them subsidized, to the United States, while just five thousand American businesspeople traveled the other way.
Malone, Michael S.. Intel Trinity, The (p. 307). Harper Business. Kindle Edition.
Further, Japan had access to capital markets explicitly from the conglomerates and governments (VLSI) that US companies did not. That echoes today’s environment partially.
Japanese firms probably had easier access to capital: they are often affiliated with a large bank that could play a role in corporate governance through equity ownership (the Glass-Steagall Act prohibits such activities in the United States). Such bank ties probably allowed Japanese producers to weather industry downturns much better than their U.S. counterparts.* On the U.S. side, the high cost of capital in the early 1980s, the appreciation of the U.S. dollar, lagging adoption of new process technology, and quality control problems all hampered U.S. firms.
Tensions were high, and the SIA and AEA, led by Robert Noyce pushed congress to try to stop Japan from dumping semiconductors on American markets. American companies could not compete on the relative access to capital combined with the dumping going on.
Prices collapsed as Japanese firms flooded the domestic and international markets, and
memory prices contracted 60% in a year bankrupting and pushing everyone except Micron and Texas Instruments out of the memory business. Micron lead the charge with the anti-dumping complaints against Japanese firms, and National Semiconductor, Intel, and AMD followed suit.
Part of the problem was Japanese firm’s primary demand was domestic, and the self-consumption and attitude of “Buy Japan” attitudes created domestic profit pools, while Japan in turn was cut off to United States producers. The US industry could never find a smoking gun of anti-competitive action, but the entire situation was detrimental to both sides of the market.
This all cumulated in the Semiconductor trade agreement of 1986, in particular, the encouragement of American companies to be able to sell meaningfully into Japanese markets.
This essentially encouraged a 20% market share in Japan for US firms, while limiting dumping from Japanese companies. This massively benefited the two remaining US firms in the DRAM market, Texas Instruments and Micron in the latter half of the 1980s.
The reality is that the government helped partially, opening the Japanese market and slowing the price race to the bottom, but additionally yield meaningfully improved by the end of the decade for most US companies. In a mix of both the businesses adapting to crisis and incrementally better regulation - the semiconductor companies of the US improved and adapted. This was the birth of “copy exact” at Intel for example.
This crisis would eventually pass and times would be plenty again. Intel’s 1988 results are indicative of what plenty looks like.
