A Government Technology Investment That Paid Off

Sematech, the multi-company chip consortium, says it's accomplished its goals and by 1997 won't need anymore federal dollars

n our front-page story on the antitrust fangs the Justice Department seems to be growing, evidence points toward Bingaman's (Trust)Busters lumping consortia in with sundry unholy alliances. That's not a good idea, considering the recent announcement by Sematech - made up of Intel, IBM, Motorola and other blue-chip names - that it would go cold turkey from federal funds in three years or so.

True, the argument could be made that consortia are just monopolies in academic clothing, a nice way of grafting Ivory Tower hoo-ha onto horizontal cartels. But considering Sematech's accomplishment, that argument is a surface-scratcher.

Seven years ago, when Sematech was created, U.S. chip makers were about to go in the tank because Japan was making the product cheaper. At its inception the consortium faced the usual blather about government picking winners and losers, as Japan sat on 46 percent of the world market with the United States at about 43 percent.

Now, U.S. Big Chips are on top, and will probably control half the $78 billion world semiconductor market by next year. America: 48 percent. Japan: 36 percent. That's a pretty good return on a $690 million taxpayer investment -- assuming the benefits will continue trickling down to the consumer, as they already are via the prices of hot-chip PCs.

Ironically, the idea of a consortia of the biggest and best companies committed to a national competitiveness goal is nothing if not Japanese.

Maybe the consortium-alliance idea is unwieldy applied across other manufacturing lines -- machine tools, for instance, or construction hardware -- but it seems to have worked for the personal computer industry, as the IBM/Apple/Motorola alliance can prove with the Power PC chip.

In fact, rumor has it Motorola may at least make an investment in Apple, probably to get the chip rolling past its software-based limitations.

Government and industry should immerse themselves in a detailed analysis of what Sematech did, didn't do, and the market forces in place at the time. Then, they should decide on a case-by-case basis what other U.S. industries might benefit from a similar venture.

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