From Confrontation to Coopetition in the Globalized Semiconductor Industry

The silicon chip is not only a symbol of marvellous technologies that are transforming industrial production and leisure time in society, but also of trade and technology conflicts while at the same time offering the potential for cooperation.The purpose of this paper is to show that the semiconductor industry has moved from being highly confrontational to being much more cooperative as is evidenced by the emergence of cross-national strategic alliances between companies, spanning R&D, product development, production and distribution.Over the last 15 years the semiconductor industry has experienced startling reversals of competitive fortune in which the USA dominated in 1970s, then Japan entered in 1980s, and in 1986 surpassed the USA as the largest producer of semiconductors with most US firms abandoning DRAM production due to price competition.This reversal of market position has become known as the X-curve. Since the early 1990s the Americans are on top again but with the Koreans and the Taiwanese coming on fast.With China and perhaps India coming on line in the present decade or so, these reversals in competitiveness will continue to play themselves out in the market.Due to external economies and spillover effects for other industries, this industry is considered to be a strategic sector, not only in the USA, where the industry came into existence, but also in Japan and Europe.Observing the excessive returns earned initially in this industry in the USA, Japanese companies wanted to shift these profits, at least in part, to Japan, for which the Japanese government provided support.The closing of the Japanese market both to imports and foreign direct investment undermined the initial American competitive strength.In order to counteract the loss of competitiveness the US industry reacted, besides by restructuring, by creating, with government funding, the research consortium SEMATECH, while the American government responded by concluding since 1986 bilateral trade agreements with Japan in which Japan initially agreed to "voluntarily" restrict its exports of semiconductors and to "voluntarily" expand the imports of American chips.In the mid-1980s Europe was a marginal player in the global competitive battle and suffered dependence on the USA and Japan.This was a consequence of decisions taken by European firms but part also lies in the fragmentation of the European market and the policy pursued by