Semiconductor devices are the key components of computers and of a wide variety of other electronic equipment. Inasmuch as the entire electronics industry is considered vital to the health and growth of the economy, semiconductors received significant attention in Japan during the 1970s and 1980s. By the end of the 1980s, Japanese firms dominated world production and trade in certain segments of the semiconductor industry. In particular, they came to dominate the world market in dynamic random-access memory units (DRAMs). The Japanese share of the world merchant market for 1-megabit DRAMs at the end of the decade, for example, was estimated at 90 percent, while other estimates put the Japanese share of all semiconductor devices at 48 percent. Trade data showed that in 1988 Japan exported more than US$12 billion in semiconductor devices (and vacuum tubes), representing a dramatic increase from US$6 million in 1960 and just over US$2 billion in 1980. Semiconductor imports, however, totaled only US$2.2 billion in 1988.
The rise of Japanese competition and the decline in the world market share held by United States manufacturers, coupled with allegations of unfair trade practices, made semiconductors a contentious issue between the United States and Japan throughout the 1980s. The allegations included charges of dumping in the United States market and of import barriers artificially limiting the market share of United States firms selling in Japan. Negotiations in 1986 produced an agreement that led to an increase in Japanese DRAM export prices and that also included a provision to increase the United States share of the Japanese market (from the 10 percent that prevailed at that time to 20 percent by 1991). United States complaints that Japan failed to carry out the agreement in good faith led to retaliation, the imposition of punitive 100 percent tariffs on US$300 million of Japanese exports to the United States. Evidence that the export prices of DRAMs had risen led to partial elimination of the sanctions, but others remained until compliance was seen in increasing the United States market share in Japan. This entire episode remained very controversial at the end of the decade, particularly the question of specifying an acceptable market share for United States-made products in Japan.
Data as of January 1994