Chip War

The 1980s saw US semiconductor firms, particularly Silicon Valley’s Advanced Micro Devices (AMD) and Intel, engage in fierce competition with Japanese companies like Hitachi, NEC, and Toshiba. This chapter explores how the US chip industry viewed Japan’s growing dominance in the global market as an economic war, driven by Japanese firms’ superior quality, government support, and access to cheap capital. While US companies struggled with higher interest rates and internal disputes over intellectual property, Japanese companies benefited from a protected domestic market and relentless investment in production capabilities. The tensions led to accusations of espionage and unethical practices on both sides, further intensifying the rivalry. Despite American firms’ initial lead in innovation, Japan’s aggressive focus on efficiency and quality allowed it to capture a significant portion of the semiconductor market, particularly in DRAM chips, threatening Silicon Valley’s dominance.

In the 1980s, GCA Corporation, once a dominant player in the semiconductor lithography industry, began its steep decline. The company initially led the market with its innovative stepper machines, which were essential in photolithography, a process key to Moore’s Law and the miniaturization of chips. However, GCA’s mismanagement, internal chaos, and arrogance toward customers led to decline, particularly as Japan’s Nikon began producing superior steppers. Despite GCA’s early success and collaboration with companies like Texas Instruments, their Japanese competitors soon overtook them in market share. By the mid-1980s, GCA’s inability to respond to customer needs and Nikon’s superior manufacturing capabilities symbolized the broader shift in global technology leadership from the US to Japan.

In Chapter 18, the leaders of the US semiconductor industry—Bob Noyce, Jerry Sanders, and Charlie Sporck—gather to address Japan’s growing dominance in chip production. Once thriving and competitive, American chipmakers were losing market share, with Japan supplying 70% of the world’s lithography equipment by the mid-1980s. Seeing semiconductors as strategically vital, much like crude oil, they formed the Semiconductor Industry Association to lobby for government support. The US military, increasingly reliant on semiconductors for advanced weapons systems, saw Japan’s rise as a national security threat. As US chipmakers turned to Washington for help, the Pentagon launched initiatives to revive the American semiconductor industry, recognizing that leadership in electronics was essential for military superiority. The chapter highlights how the shift in semiconductor production from the US to Japan jeopardized American technological and military dominance.

In Chapter 19, Miller details the struggles of the US semiconductor industry during the 1980s, as Silicon Valley companies faced mounting pressure from Japanese competitors. Bob Noyce, one of Silicon Valley’s pioneers, lamented the US’s declining dominance and the industry’s failure to keep pace with Japan’s advancements, particularly in the DRAM market. Despite the semiconductor sector’s strategic importance, debates raged in Washington about whether government intervention was justified. Efforts to secure relief, including trade agreements and new policies like the creation of Sematech—a consortium designed to support US chipmakers—provided limited success. While Sematech helped improve domestic collaboration, its biggest challenge remained saving America’s lithography industry, which was already being outcompeted by Japanese companies like Nikon and Canon. Noyce’s death in 1990 marked the end of an era, as the US semiconductor sector continued to struggle despite efforts to revive it.

In Chapter 20, Miller examines how Japan, once considered an economic underdog, became a major technological power, especially in the semiconductor industry. Sony’s Akio Morita embodied this shift, evolving from a humble electronics salesman into an informal ambassador for Japan’s rising global influence. His co-authored book, The Japan That Can Say No, criticized America’s declining leadership and praised Japan’s advancements, particularly in semiconductor technology, which had become vital for both consumer electronics and military applications. Morita’s provocative stance, along with far-right politician Shintaro Ishihara’s aggressive rhetoric, alarmed US leaders. Japan’s dominance in DRAM chips and semiconductor production posed a real threat to US technological and military superiority. The chapter explores growing American concern over Japan’s increasing economic and technological clout and the potential geopolitical consequences of this shift.