Bilateral Japan-US Relationship in the 1980s and the Foundation of the World Semiconductor Council

Integrated circuits (ICs or microchips) are used in high-tech consumer electronics such as computers and automobiles. In the history of IC manufacturing, the 1980s featured rapid improvement and spreading of the chip manufacturing technology around the globe. This led to the United States manufacturers which had been the incumbent leaders so far to face new competition. The Japanese manufacturers had effectively captured both the US and world market by the mid-1980s. In reaction, the US manufacturers filed complaints to the Office of the US Trade Representative leading to an official protective initiative. Under the threat of being cut out of the largest electronics market at the time, Japan agreed to sign the 1986 Japan-US Semiconductor Agreement, with significant demands placed on its industry. The agreement was renewed in 1991 and in 1996, the expectation on the US side was another renewal. Instead, Japan proposed founding the World Semiconductor Council (WSC). This major framework change from a bilateral agreement between governments to a multilateral forum of private sector representatives begets the question of “why.” This paper presents a historical analysis of the factors that led to the Japanese proposal for foundation of the WSC. In this analysis, explanation factors are divided into international and domestic factors from the viewpoint of Japan. It is concluded that the effect of the US diplomatic advantage in the 1986 agreement and Japan's own domestic political economic transformation culminated in the WSC proposal.