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Yeutter Says Chip Price Rise Was Expected

September 25, 1986|Associated Press

SANTA CLARA, Calif. — U.S. Trade Representative Clayton K. Yeutter says "nobody should have been shocked" that semiconductor prices jumped after the recent semiconductor trade agreement with Japan.

"We've had some cheap shots not only from some of the economic writers who have taken a look at this agreement, but there have been some cheap shots from other nations as well," Yeutter said.

The pact reached July 31 seeks to open Japanese markets to U.S. manufacturers and to prevent Japanese chip companies from dumping products overseas in order to force competitors out of the market.

Chip prices have soared since the agreement, pleasing U.S. manufacturers of semiconductors but angering the companies that buy them.

List prices of memory chips have shot up 100% to 600%, the American Electronics Assn. complained earlier this month.

Consumers Will Pay More

Consumers will pay about $570 million more per year for products containing computer chips as a result of the agreement, Citizens for a Sound Economy, a Washington-based lobbying group, estimated recently.

Yeutter disputed those who called it an effort to establish a semiconductor cartel that would fix prices. He said it does not set prices, but only monitors them to make certain the Japanese are earning fair profits.

He spoke late Tuesday to 700 executives and analysts attending a Semiconductor Industry Assn. dinner.

"As long as that (anti-dumping) law is on the books, this Administration is going to enforce it, whether economic writers like it or not and whether semiconductor users like it or not," Yeutter said to applause.

Yeutter said he could understand objections from the electronics industry about higher chip prices.

"But there is no consumer of semiconductors or any other products who is entitled to insist on dumped prices," he said. "It is only logical to assume that if a product that has been dumped at (low) levels can no longer be dumped, the price must come up somewhere, and those consuming that product are going to have to pay more.

"Nobody should have been shocked that the prices of semiconductor products has risen."

In the trade talks, dumping is defined as selling products in the United States below prices charged in Japan or at a price that is lower than the cost of production plus a certain profit margin.

Price-Monitoring System

The Japanese, despite the agreement that was formally signed Sept. 2, have never admitted to dumping chips in the United States.

Yeutter said negotiators settled on a price-monitoring system to help establish fair price levels for various chips rather than look for punitive measures. However, he acknowledged that he has some doubts about price monitoring.

"It may turn out to be ineffectual," he said. "If it is, we're going to have to look at other alternatives."

Yeutter urged industry leaders to improve their marketing job in Japan and not just rely on the trade agreement to help them sell chips to Japanese companies.

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