TIME: Almanac 1993/TIME Almanac 1993.iso/time/120489/12048900.014

Text File | 1992-09-23 | 5.9 KB | 114 lines

                                                                                BUSINESS, Page 68

High Tech's Fickle Helping Hand


The White House wavers on funding for microchips and HDTV


    The change of strategy was so sudden and striking that even
veteran policymakers were taken aback. After stressing for
months how important it was for the U.S. to stay competitive in
high technology, the Bush Administration was getting ready to
pull the plug on its two most widely publicized high-tech
initiatives. According to reports circulating in Washington, the
Administration was determined to cut not only the $10 million
it had pledged for research into high-definition television, but
all federal support -- including $100 million in 1991 -- for
Sematech, the Reagan-era industrial consortium designed to
catapult the U.S. into the lead in the technologies for
manufacturing computer chips.

    Then last week, amid a chorus of complaints from Congress
and industry, came the results of two blue-ribbon studies, one
by the National Advisory Committee on Semiconductors and the
other by the Economic Policy Institute (EPI). Both concluded
that what American high-technology industries need is more
Government leadership, not less. Said Ian Ross, president of
AT&T Bell Laboratories and chairman of NACS: "Every trend you
look at is in the wrong direction for the U.S." Next day the
Administration reversed itself again, denying that it had any
plans for technology budget cuts.

    The high-level waffling was the latest manifestation of a
debate that has raged within the White House over the proper
role of Government in what is becoming an increasingly global
economy. Is federal intervention necessary to tip the scales of
corporate decision making from short-term gain to long-term
planning? Can the state stimulate private industry without
making firms dependent on Government handouts? The Bush
Administration is torn. Many staff members, at the Commerce and
Defense departments believe that robust electronics industries
are vital to the national security and should be fostered by the
Government. But conservatives led by Budget Director Richard
Darman argue with equal vehemence that it is counterproductive
for the Government to try to "pick winners and losers" in high
tech.

    What complicates the issue is that the electronics industry
is as divided as the Administration on these questions. Even as
U.S. chipmakers cry for tough Government action to open Japan's
vast chip market to increased sales of American-made
semiconductors, U.S. computer makers, who stuff their machines
with foreign chips, are worried that trade tension could
endanger their supply. In recent months, joint ventures between
U.S. and Japanese chipmakers have multiplied at such a rate that
it is getting hard to tell where one country's interests end and
the other's begin.

    Nowhere is this creeping globalism more striking than in
high-definition television. Six months ago, American
electronics manufacturers were using apocalyptic terms to
describe the race to build tomorrow's TV sets, calling it a
life-and-death struggle for economic survival. But plans for a
coordinated U.S. effort quickly got bogged down in arguments
over technical standards.

    By summer, the Administration was beginning to back away
from HDTV. By September, the Commerce Department had withdrawn
a proposal for a U.S. initiative. This month several U.S.
chipmakers announced plans to develop chips for TV sets built
according to standards set by NHK, Japan's national broadcasting
corporation. In effect, the companies were agreeing to become
subcontractors in a technology dominated by Japan. The race is
not over yet; several U.S. firms are working on promising
technologies without Government help. But the federal
cheerleading has stopped. "The matter had been too much
politicized in the U.S.," says NHK executive Masahiko Ohkawa,
with evident relief. "I think it's better to cool it down a
bit."

    The problems of the semiconductor industry will be more
difficult to resolve. Chipmakers are vital suppliers to the
overall electronics industry, which represents the U.S.'s
largest manufacturing business (projected 1989 revenue: $300
billion), bigger than steel, aerospace and automobiles combined.
But as semiconductor-making equipment becomes increasingly
sophisticated, the cost of staying competitive may grow beyond
the capacity of even the largest U.S. firms. Japanese
semiconductor manufacturers, with the active encouragement of
their government, are spending 50% more on research and
development than their U.S. counterparts.

    The electronics race is a high-stakes contest. The report
issued by the EPI last week estimates that the U.S. stands to
lose 2 million jobs and suffer a $225 billion increase in its
annual trade deficit by the year 2010 if it does not develop a
coherent strategy to compete in HDTV and associated industries.
"The Bush Administration appears content to allow American high
technology to wither away," complained Democratic Representative
Norman Mineta of California. "It is as though they woke up one
morning and decided calmly to throw away our future."

    Opposition to U.S. research cutbacks proved too much even
for Budget Director Darman. By last week he was backpedaling,
telling reporters that the press accounts of proposed research
cuts were "totally wrong. Not just 60% wrong, but 100% wrong."
He refused any further comment, however, and sources within the
Administration speculate that rumors of R.-and-D. cuts were a
trial balloon floated by Darman himself -- one that has now been
emphatically shot down. The funding for Sematech and HDTV
research is likely to survive, at least until next year. But the
debate about the proper role of Government in the age of
electronics is likely to remain every bit as contentious as the
high-tech race itself.