Applicability of the Cases
These cases can be used as teaching materials in courses related
to trade and investment,
competition and industrial policy, and international political economy.
They are especially applicable to second-year graduate masters programs
that include international business, public policy studies, commercial
diplomacy, and international economics. These cases are well known,
having been covered by the international media over a period of many
years. Furthermore, many textbooks, trade books, and professional texts
have referred to these cases at various periods in their history. The
work presented here, however, is the most comprehensive ever published.
In addition, a selected bibliography of 15 references is provided and
these works are divided up to show those related to the individual cases
A, B, and C. The bibliography is part of this teaching note and the
instructor may wish to provide it to the class. In addition, a set of
questions follows each case; the instructor may consider them to be the
minimum required to study the cases.
The cases can be used in the following ways:
The cases are divided into periods that correspond to the three
periods prior to each of the three U.S.-Japan Semiconductor Trade
Agreements. Their designations are A, B, and C. The epilogue provides
the details surrounding the last agreement in 1997.
The first case (A) should take the longest amount of class time,
perhaps two hours, while the remaining cases (B, C, epilogue) are likely
to require another two hours in all.
Case A begins by looking at the trade problems faced by the U.S.
semiconductor industry. The focus here is on the leadership of the key
merchant firms. This leadership, in the form of the Semiconductor
Industry Association (SIA), is the primary focus of all the cases. The
core of the SIA, representing the merchant makers, interacts with the
All of the players are represented in the case write-up, but the
evidence shown in the exhibits only focuses on a few of these players at
a time. The keys to the business-government relationship from a market
as well as non-market perspective are described in the text itself. It
may be important for the class to do some outside research after the
first case is handed out before class discussion. The bibliography
pertinent to each case may be helpful to the students.
Case A should be discussed before Case B is distributed; after
Case B is discussed, Case C should be distributed; and, finally, the
epilogue can be distributed.
The progressive format of the exhibits (expanded after each case)
is meant to convey the dynamics of the cases in terms of the market and
nonmarket forces being brought to bear. The exhibits also focus on the
several parameters that provide key data for discussion. Research prior
to the case discussions, with the bibliography as a guide, will provide
The case discussion and resolution therefore may be based on the
case write-up, the exhibits, the bibliographic material and outside
research, and the instructor’s presentation and guidance.
The first and simplest approach to teaching this case is to allow
open discussion of the questions following each case before handing out
and pursuing the next one (i.e., A before B, B before C, etc.) until the
epilogue is finally reached. This approach offers less student
interaction than the approach suggested in Section III, 2, but gives the
instructor the opportunity to judge student performance.
The second approach is to divide the class into a number of
groups and assign each group to take the role of one of the players (1
through 9) listed in Section II of this teaching note. Each group should
clearly state in an analytical format the key elements of its assigned
interest in terms of (a) the position of that player with regard to the
conflict; (b) the evidence that supports their position; (c) the charge
placed against them, if any; and (d) actions they are willing to take to
reach a resolution and a compromise. After this is accomplished, the
teams should then be realigned to take only one position, i.e., either
the Japanese or U.S. side, by combining all groups of either nation
together into a national group for internal discussion.
Thus, one team, say Team J, would have MITI, Japanese chip makes,
Japanese customers, and Japanese equipment makers on their team, while
Team U would have USTR, American merchants, American captives, American
customers, and American equipment makers on their team.
Each team must attempt to reach an agreement that the instructor
believes would be equivalent to the first U.S.-Japan Semiconductor Trade
Agreement. When the discussion is completed and the trade agreement
explained (on the classroom board), Case B should be assigned so the
class can read about the actual results that occurred in 1986, and then
continue on to the second round of U.S.-Japan negotiations.
The first U.S.-Japan Semiconductor Trade Agreement has been
signed but inaction on the part of Japan in a decision by President
Reagan to initiate sanctions.
A general discussion can be elicited by asking these questions:
Finally, the class should be asked how the SIA should approach
the second U.S.-Japan Semiconductor Trade Agreement. The original teams
that argued the U.S. and Japan positions should reassemble. Again, each
side should decide how to position itself for the second agreement.
After the resolution of Case B, the class should be given Case C
and its epilogue. After reading these parts, the class will have read
the entire set of cases up to and including the final meeting in 1996.
Summarizing these cases should be left to the instructor. This
summary should consider the following major points:
The U.S. semiconductor industry was successful in the long run
because the foreign share of
market in Japan was much higher by 1996, while the share of the DRAM
market held by Japanese firms declined due to
competition from other firms(albeit not necessarily U.S.
U.S. captives, Koreans, Europeans, as well as the U.S. firms
Texas Instruments and Micron
The SIA was successful in several ways:
The Japanese industry lost its momentum and now, in 1997, is
attempting to regain it by extensive industry/government cooperation in
applied research and in establishment of businesses in emerging
countries such as China.
Other events favorable to the U.S. side included the following:
Borrus, Michael G. , 1988. Competing
for Control: America’s Stake in Microelectronics. Cambridge, MA: Ballinger Publishing
Flamm, Kenneth, 1996. Mismanaged
Trade. Washington, D.C.: Brookings
Institute Press, 425-459.
Fujiwara, Mikio, 1988. “This a Side letter to the U.S.-Japan
May 1988, 124-137.
Hill, C. W. L., 1994. International
Business. Irwin Publishing: Chicago, IL, 147-150.
Hatano, Daryl, 1985. “Why SIA Filed 301 Trade Action,” The Japan Economic Journal. October 12, 29.
Harvard Business School, 1987. “Semiconductor Industry
Association and the Trade Dispute with Japan,” Case Studies 9-387-205, 9-387-195,
9-388- 049. Cambridge, MA: President and Fellows of Harvard College.
Hatakayama, Hoboru, 1995. “On Trade Fiction,” Journal
of Japanese Studies. Nov. 6, 1995, 8-11.
Howell, Thomas R., William A Noellert, Janett H. MacLaughlin, and
Alan Wm. Wolf, 1988. The Microelectronics Race: The
Impact of Government Policy on International Competition. Boulder, CO: Westview Press,
Procassini, Anderw, 1995. Competition
in Alliance: Industry Associations, Global
Rivalries, and Business Government. Westport, CT: Quorum
Books, 11-12, 45-47, 73-75, 97-99, 177-200, 252-2, 279-281, 289-291.
Prestowitz, Clyde, Jr., Naotaka Matsukata, and Andrew Szanisszegi,
1996. Prospects for U.S.-Japan
Semiconductor Trade in the 21st Century.
Washington D.C.: Economic Strategy Institute
Prestowitz, Clyde, Jr., 1989. Trading
Places: How We Are Giving Our Future to Japan and How to Reclaim It. New York, NY: Basic Books, Inc.
Rugman, A. M., and Richard M. Hodgetts, 1995. “Global Strategic
Planning,” International Business: A
Strategic Management Approach. New York,
NY: McGraw Hill, 212-237.
Semiconductor Industry Association, 1995. Semiconductor
Industry Association: Status Report & Industry Directory 1995-1997. San Jose,
Sandaram, A. K., 1995. “The Chips Are Down,”
The International Business Environment. Englewood Cliffs, NJ: Prentice Hall, 90-96.
Tyson, Laura E’Andrea, 1992. “Chapter 4: Managing Trade and
Competition in the Semiconductor Industry,”
Who Is Bashing Whom: Trade Conflict in
High Technology Industries. Washington, D.C.: Institute of
International Economics, 85-133.
United States Government. The U.S.-Japan Semiconductor Industry
Agreement 1986. Office of the U.S. Trade Representative.