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HOME-GROWN CHIPS BOOM Sales of U.S.-made semiconductors pick up steam


SCOTTSDALE, Ariz. -- The news from Europe and Japan was grim, and even the Koreans were unusually subdued. But after two years in a tough recession, sales of American chips are starting to boom, according to executives attending the annual In-Stat Inc. semiconductor conference.

U.S. chip executives said in presentations and private conversations that sales are picking up faster than they expected as the national recovery solidifies.

And panelists at the conference had even more encouraging words for U.S. chip makers: Changing dynamics in the world semiconductor market, including the economic crisis in Japan, make it likely the U.S. industry will be able to make substantial gains in worldwide market share for the first time in years.

Although Japan now owns 40 percent of the worldwide semiconductor market, compared with the United States' 28 percent, the U.S. industry may have a chance to take some of that away as a severe engineering shortage, skyrocketing technology costs and trade frictions slow down Japanese progress, said Masao Yoshitomi of Mitsubishi Electric.

In an uncharacteristically pessimistic speech, Mr. Yoshitomi called this "a turning point for the Japanese semiconductor industry," as it tries to figure out how to fund development of advanced versions of the memory chips known as dynamic, random-access memories.

Mr. Yoshitomi said a 1-gigabit DRAM -- not expected to be available before the end of the decade -- will cost between seven and nine times more than a 1-megabit DRAM did to develop.

Much of the Japanese market share gains in recent years have been made in the DRAM area, and the companies have invested heavily in the technology. But falling memory chip prices, combined with the escalating cost of borrowing money for research and development, have hit the Japanese hard and underscored how dependent they are on DRAM sales.

"This is a healthy industry for the future, but it is hard right now," Mr. Yoshitomi said.

His words were echoed by Guenther Dengel of Philips Semiconductor of Eindhoven, The Netherlands, who said there was not much positive to say about the European chip industry today.

In fact, he predicted the European share of the worldwide chip market will fall from 18 percent today to 17 percent in 1996 as Asia-Pacific countries, Japan and the United States continue to gain ground in Europe.

He said he was not optimistic an economically united Europe would quickly boost chip sales. And it will take years for the promise of Eastern Europe to be realized.

The Korean semiconductor industry, which has grown rapidly in the last few years, is also in the midst of a transition, which could ultimately help U.S. companies, said C.S. Park, president of Hyundai Electronics.

Almost 80 percent of the Korean semiconductor industry's sales are in DRAMs, and the country imports more than 80 percent of its non-DRAM needs, Mr. Park said. So, Korean chip makers are eager to establish partnerships with U.S. companies that would give them access to new product areas.

"This is an opportunity for small and large U.S. firms to tap into our market," Mr. Park said.

The only warning sounded about the chances for a U.S. comeback came from James Norling, president of Motorola Inc.'s semiconductor division. Mr. Norling reminded attendees that the U.S. share of the Japanese market has been at 14 percent for almost two years, despite a trade agreement between the two nations calling for a 20 percent share by the end of this year.

Mr. Norling and others said the United States must have fair access to the lucrative Japanese market to have a healthy industry.

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