Hubris And Nemesis In The IC Industry

"The U.S. Defence Department's Science Commission recently prepared a huge classified report on electronic engineering", wrote the Japanese politician Shintaro Ishihara in 1989, "looking at this, one can well understand the sense of crisis that the US has with respect to Japan. The report states that if Japan is left to go as it is, it will be impossible to get the lead back."

Ishihara pointed out that the effectiveness of the inter-continental ballistic missiles of the Soviet Union (as Russia then still was) and the USA, depended on the accuracy of the missiles' control systems. And the missile control systems were made up of microchips.

If Japan had the world's best microchips then, argued Ishihara, Japan could decide which side - the Americans or the Soviets - could have the most accurate missiles.

"If, for example, Japan sold chips to the Soviet Union and stopped selling them to the US, this would upset the entire military balance", wrote Ishihara.  Hubris was blossoming in the Tokyo political hothouse.

Ironically, the USA's response to the prospect of being less advanced than Japan in ICs was to adopt the Japanese model of a government-financed industrial consortium to develop microchip technology.

In 1987 the US government approved an industry-government consortium called Sematech after lobbying by the US Semiconductor Industry Association led by Bob Noyce, founding CEO of Intel and Charlie Sporck, CEO of National Semiconductor.

Sematech's goal was to support new manufacturing technology development through the use of U.S. industry funds and matching government grants. The aim was to regain technological superiority in microchip technology and regain its world leading market share. Noyce became Sematech's first CEO. 

That the USA could adopt a strategy which went so diametrically against the grain of the entrepreneurial culture of the US microchip industry, showed how worried it was about continuing Japanese superiority, but it worked. In less than ten years, the USA had overtaken Japan in world market share.