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Who let down the U.S. -- big firms or small? Two scholars came to sharply different conclusions in essays published earlier this year by the Harvard Business Review. Supply-Sider George Gilder, author of the book The Spirit of Enterprise, cites the roaring success of several of the newest Silicon Valley semiconductor firms -- including Chips & Technologies and Cypress Semiconductor -- as proof that such start-ups are the best hope for continued U.S. economic growth. In what Gilder calls the "law of the microcosm," he contends that the use of computers has given individuals more opportunity to innovate. Says he: "As circuitry is compressed onto single chips, it enhances enormously the power of individual designers and entrepreneurial creators."
But Charles Ferguson, a former IBM analyst who is now a research associate at M.I.T.'s Center for Technology, Policy and Industrial Development, argues that the U.S. semiconductor industry is collapsing because start-ups have siphoned off talented engineers from larger firms. Example: in 1981 a group of Intel executives started Seeq Technology (1987 revenues: $44.6 million) to develop sophisticated memory chips. Four years later, three Seeq employees specializing in such chips quit to form their own company, Atmel.
Ferguson contends that America's most consistently successful and advanced industries, notably aerospace and chemicals, have been dominated by a few giant companies. (Gilder might cite as a counter-example RCA, which squandered its technological heritage by investing in such diversions as carpetmaking and rental cars.) High-tech corporations, says Ferguson, need a heavy capital base to pay for research, computer networks, manufacturing systems and worldwide organizations for sales and customer support. Upstart U.S. firms, too small to bankroll their own factories, often turn to Japanese companies for manufacturing help or sell their key technologies to raise capital for expansion and product development. A common result: the erosion of overall U.S. market share.
What can be done to help U.S. companies gain global clout? Many business leaders and economists contend that major companies must be permitted to work together, in some cases to plot joint international strategies. According to economists like Lester Thurow, dean of M.I.T.'s Sloan School of Management, U.S. antitrust laws may be out of date in an era when it is virtually impossible for one company to monopolize the world market. In Japan major companies work together and with government planners to a much greater degree. Says Motorola's Weisz: "We can't continue as a house divided against the rest of the world."
Persuaded that the critical U.S. semiconductor and computer industries need special help, the Reagan Administration has permitted the formation of two experimental consortiums, Sematech and the Microelectronics and Computer Technology Corp. (MCC), both based in Austin. Since 1983, 19 major computer manufacturers, including Control Data, Digital Equipment and Honeywell, have pooled advanced research efforts through MCC. More than 70 new advances developed by MCC are now being refined by member firms.