Big Blue's Chip Club

Of all the trade battles between Japan and the U.S., few have provoked more friction than the fight over the semiconductor industry. Ten years ago, U.S. companies manufactured 80% of the world's computer microchips, but since then the Japanese have taken over roughly that share. Last week a group of seven American computer companies, including archrivals IBM and Digital Equipment, announced a move that might help the U.S. recoup some of its lost ground. The companies will create a joint venture that will manufacture and sell dynamic random-access memory (DRAM) chips using IBM technology.

U.S. companies currently account for only 10% of the world's production of the most advanced DRAM chip, the one megabit, which has enough memory to contain the equivalent of 100 pages of double-spaced text. The new venture, called U.S. Memories, plans to manufacture the next generation: the four- megabit chip. Last week IBM disclosed that it is already producing the more powerful semiconductor for use in its own computers and other products. That may give IBM a lead of several months over its Japanese rivals, who have yet to gear up mass production of the four-megabit semiconductor.

The U.S. Memories plant, which may cost as much as $1 billion to build, will not be ready for at least a year and a half. "They're going to have to hurry up if they don't want to fall too far behind," says Sam Navarro, who follows the industry for the investment firm Ladenburg, Thalmann. Despite the time squeeze, some experts believe U.S. Memories could capture 30% to 40% of the U.S. chip market by 1991.

The venture must also win congressional approval before it can proceed, since antitrust law generally prohibits joint manufacturing ventures between major competitors. But experts predict that Congress will make an exception for U.S. Memories. Besides the potential gain in chips, they contend, the lessons learned from the DRAM joint venture could show American industry how to become more competitive in other high-tech areas, including high-definition television.