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Japan's Firms Have an Edge in Vision, Support

June 26, 1988|JAMES FLANIGAN

TOKYO — At the research center of Nippon Electric Corp. in Kawasaki, near Tokyo, Hirokazu Goto, general manager, explains that his laboratories are pursuing research on a single memory chip that will hold 64 million bits of information--the telephone books of a dozen cities.

Such a chip will require circuits so fine--less than 3-millionths of an inch apart--that any resistance to electric current would melt the circuitry. So Goto's laboratory is also doing research on superconductivity--applying new discoveries of ways to conduct electricity without resistance.

But superconductivity will demand new materials, so the NEC lab is also experimenting with fine ceramic compounds. Of course, explains Goto, this is advanced research, so the lab hopes for product breakthroughs only in 10 years time.

Yet 10,000 miles away in Washington, NEC's research, and that of other Japanese companies, is arousing concern. The U.S. Office of Technology Assessment will report this week that Japanese companies are well ahead in the race to produce commercial products from discoveries in superconductivity. And Sen. Jay Rockefeller (D.-W. Va.) says U.S. industry is losing to Japan in the race to develop advanced materials.

The stakes are high--the payoff someday will be in faster transportation, more powerful computers and more efficient energy systems. And the consequences, in lessened opportunities for future generations, are grave when a nation falls behind in technology.

Yet U.S. industry is reluctant, says Rockefeller, to invest in advanced materials that will not show a profit for 10 years. Similarly, the Office of Technology Assessment found U.S. companies--with the significant exceptions of American Telephone & Telegraph and International Business Machines--hesitant to invest in superconductivity, while a dozen Japanese companies push ahead because they see superconductors promising radical change in their business.

Japan Was Inspired

So the question arises: Why does U.S. industry seem so timid these days compared to the daring Japanese? One answer is that too many companies lack vision, but another, equally important, answer is that U.S. companies lack support, from both shareholders and government.

Vision first. NEC, the company with the research lab in Kawasaki, is a world leader today largely because of the vision of Koji Kobayashi, who is now its chairman emeritus and the influence of America's AT&T. Kobayashi pushed NEC, a supplier to Japan's telephone system, into computers and electronics because his travels to AT&T inspired in him--a postwar Japanese engineer, struggling to communicate in a language not his own--a vision of a telephone that would automatically translate all languages.

That vision is still to be realized; there is no such telephone yet. But in working toward that goal, NEC has grown into the world's fourth-largest supplier of telephone equipment, its fifth-largest computer maker and the leading manufacturer of semiconductors. And the inspiration for the research lab that backed its effort was Bell Laboratories, AT&T's great research facility in New Jersey. Michiyuki Uenohara, an NEC engineer, returned to Japan in 1967 after working at Bell Labs determined to create a similar research center in his country. So the best America has to offer inspired the best in Japan.

Yet these days Japanese businessmen see fear, not inspiration, in their U.S. counterparts. "If a U.S. manager fails to increase profits, even two or three quarters, the shareholders want him fired," says Tadahiro Sekimoto, NEC's president. "So U.S. managers cut research and development to produce profit for the shareholder. That is the wrong policy."

Sekimoto's company spends heavily on R&D--$2 billion or 10% of its $21 billion in sales--but reports very low profits: only about 1.5% on shareholders' investment. How can it do that? One reason is that the Sumitomo Bank, one of Japan's giants, owns 26% of NEC and is content to see the company continue growing.

And another reason is government support. Japan has never had any illusions about risk taking. "Businessmen are risk averse," says Naohiro Amaya, a former deputy Minister of Trade and Industry and an architect of Japan's industrial policy. "Research and development is necessary for the future, but it is a gamble that businessmen hesitate to take," says Amaya. "Therefore, if the invisible hand cannot drive research, the visible hand must."

He means that the Japanese government, which, by supporting desired industries with bank loans, tax credits--and, in many cases, outright protection--removes the risk from advanced technologies. Then, with the risk removed, Japanese companies barrel into the new technologies--daredevils with a safety net, in other words.

Should the U.S. government do likewise? It already does, pushing military technology through Defense Department procurement. However, it is increasingly clear that defense work does not produce commercial products. That is why Sen. Rockefeller and the Office of Technology Assessment recommend government action--with OTA calling for a Commercial Technology Agency with a $500-million budget to aid high-tech research.

After that, all U.S. companies would need is vision. Perhaps, turnabout being fair play, many of them should take a look at NEC.

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