TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/120489/12048900.014

Text File | 1990-09-19 | 6KB | 101 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.