Chip War

The 1980s proved to be a challenging decade for the US semiconductor industry, particularly as it faced fierce competition from Japan. While American companies like Intel and Texas Instruments believed their innovation leadership was unassailable, Japanese firms like Toshiba and NEC outperformed them in quality and reliability. Japanese products, including semiconductors and consumer electronics like Sony’s revolutionary Walkman, gained global market share by offering superior craftsmanship and efficiency. As Japan began to redefine its image from a producer of cheap goods to an innovator of high-quality technology, concerns grew in Silicon Valley about the future of US dominance in the industry. Richard Anderson of Hewlett-Packard, a gatekeeper of semiconductor purchasing, highlighted the significant gap in quality between American and Japanese chips, signaling a shift in the global tech landscape.

The 1980s saw US semiconductor firms, particularly Silicon Valley’s Advanced Micro Devices (AMD) and Intel, engage in fierce competition with Japanese companies like Hitachi, NEC, and Toshiba. This chapter explores how the US chip industry viewed Japan’s growing dominance in the global market as an economic war, driven by Japanese firms’ superior quality, government support, and access to cheap capital. While US companies struggled with higher interest rates and internal disputes over intellectual property, Japanese companies benefited from a protected domestic market and relentless investment in production capabilities.