Chip War: The Fight for the World's Most Critical Technology

by Chris Miller

Morita, now sixty-nine years old, watched Japan’s fortunes decline alongside Sony’s slumping stock price. He knew his country’s problems cut deeper than its financial markets. Morita had spent the previous decade lecturing Americans about their need to improve production quality, not focus on “money games” in financial markets. But as Japan’s stock market crashed, the country’s vaunted long-term thinking no longer looked so visionary. Japan’s seeming dominance had been built on an unsustainable foundation of government-backed overinvestment. Cheap capital had underwritten the construction of new semiconductor fabs, but also encouraged chipmakers to think less about profit and more about output. Japan’s biggest semiconductor firms doubled down on DRAM production even as lower cost producers like Micron and South Korea’s Samsung undercut Japanese rivals. Japan’s own media perceived overinvestment in the semiconductor sector, with newspaper headlines warning of “reckless investment competition” and “investment they cannot stop.” CEOs of Japan’s memory chip producers couldn’t bring themselves to stop building new chip fabs, even if they weren’t profitable. “If you start worrying” about overinvestment, one Hitachi executive admitted, “you can’t sleep at night.” So long as banks kept lending, it was easier for CEOs to keep spending than to admit they had no path to profitability. America’s arm’s-length capital markets hadn’t felt like an advantage in the 1980s, but the risk of l...