|
|
Saturday, February 10th, 2001
|
A month ago I decided to buy another computer for the office, normally one of the easiest tasks in running a small business in the United States. I placed an order online with a company that had shipped good computers in the past. After a couple of weeks, I called and asked why the order was 2 weeks late. The sales clerk at the other end of the line apologized and told me: "We can�t ship for some time. We simply cannot get the parts."
I called another company and was ready to place the order before I noticed that it would take at least 30 days to ship. It was the same story; key computer parts were back-ordered. Computers are plentiful in retailers such as Office Depot and Best Buy, but these tend to be older models lacking important new features. Buyers seeking up to date features have a choice of pounding the keyboard or taking a number.
Product shortages are rare in the U.S., where a free market resolves imbalances rather quickly. However, U.S. high-tech industries have become so dependent on Japanese components that they have almost no say in the matter. Critical shortages are appearing regularly and are likely to get worse.
The September, 2000 issue of PC World Magazine paints an uncharacteristically gloomy picture of high-tech in the United States: "Shortages of several vital high-tech components have arisen this summer, causing product delays that will probably last through the holiday season." Buy Now or Cry Later: Shortages Loom for Hot Products PC World, September, 2000 p. 72. PC World warns that critical shortages of capacitors, flash memory, and flat panel displays are causing some American companies to delay release dates on new products because they cannot get the key components. The articles warned consumers to forget about buying their favorite student a sassy laptop for the new school year; they will be lucky to get a top-of-the-line machine before Christmas.
Capacitors are tiny, inexpensive components found in almost all electrical goods. Flash memory is a relatively new form of data storage used in digital camera, computers, and personal digital assistants. Flat panels are the trim and slim display screens found in airplane cockpits and, increasingly, on the desks of computer users. Bill Gates, always ahead of the curve, hangs them on the wall of his home to display a variety of artwork digitalized and displayed through his computer network.
Capacitors, flash memory and flat panel displays were all invented and mass-produced in the displays were all invented and mass-produced in the U.S., but almost all of these products are now made in Japan. American technology companies, the darlings of the economy in recent years, are now constrained in their development by a shortage in the building blocks of the next generation of the high-tech world. Quite simply, America has lost control of these key technologies.
Japan gradually took over the market for these and hundreds of other key components by fighting and winning protracted trade battles with the United States. Each time factory workers or trade unions complained about unfair competition, they were drowned out by endless prattling about how consumers benefited from the low prices the Japanese companies charged. Production became concentrated in 2 or 3 companies in Japan while the American pioneers went out of business or were forced into other product lines.
Japanese companies have had an impact in components where supply has been fairly stable. Random access memory ("RAM") chips and their packaging require high quality resin. There are only two factories in the world that make such fine resin, both of them in Japan. An explosion at one of these facilities a few years ago caused spot shortages and higher prices, which persist to this day. The U.S. government would hardly permit two American factories to dominate the market in any technology, let alone one as critical as RAM chips. But the Japan Lobby in the U.S. has been able to obtain a kind of immunity from anti-trust enforcement on the part of the U.S. Government, allowing concentration of production in Japanese hands that would never be permitted with American companies.
Section 1 of the Sherman Antitrust Act prohibits contracts, combinations and conspiracies that restrain trade. Section 2 of the Sherman Act prohibits monopolies, attempts to monopolize and conspiracies to monopolize. Numerous other statutes on the state and federal level ban business activities that restrain trade. The U.S. government has hauled Visa, Master Card, Microsoft, General Electric, General Motors and other American companies into court alleging violation of anti-trust laws, but Japanese companies have been conspicuous in their absence.
I am not yet suggesting that Japanese companies are violating U.S. anti-trust laws. Such a conclusion could only be made after detailed fact-finding, which the Justice Department shows no interest in starting. However, the U.S. government should never have allowed the situation to get so out of control in the first place. It is just plain stupid to have the high-tech industry dependent on a small number of companies in Japan, especially since they seem to be having difficulties filling American orders.
The Wall Street Journal reported on August 23, 2000 that shortages in RAM chips and processors required for servers were worsening, forcing American companies to postpone or cancel plans for computer purchases. Some of the factors contributing to the bottleneck are an earthquake and a typhoon in Taiwan.
Taiwan's high-tech industry is even more dependent on Japan than America's. Many Japanese companies have moved assembly operations to Taiwan, but recent events prove that diversification is little cause for solace. American companies can't buy the parts they need from the handful of suppliers on the other side of the world. American options at this point are limited, and all of them are painful. Japanese politicians have repeatedly threatened to cut off the supply of key components if the U.S. gets too big for its britches. Earlier experiences in this regard have not been encouraging.
In 1986, economic nationalists successfully pressured the U.S. Government to impose punitive sanctions on a Japanese company for selling restricted technology to the Soviet Union, which was used to make Soviet submarines too silent for American listening posts to detect. Policy makers figured the slap on the wrist would have no downside; the 2 or 3 other Japanese companies making the critical parts would step in and grab market share. Little did they know that all the Japanese manufacturers would stand shoulder to shoulder and refuse to ship the key components until the sanctions were lifted. American companies, such as Compaq, were put in the uncomfortable position of lobbying the U.S. government on behalf of a Japanese competitor, but that was preferable to the alternative--going out of business.
Consumers do not benefit from low Japanese prices if they cannot buy the products they want. National security is endangered if key industries are dependent on foreign sources of supply. Perhaps most critically, the technology revolution cannot continue without access to the building blocks of technology. These days, it seems like Japanese companies, having cornered the market, are unable or unwilling to deliver those building blocks.
|
|
Contact Eamonn Fingleton |
|
|
|
