If there's anything that qualifies as a critical technology for the Information Age, it's flat-panel displays. From laptop computers to wall-size television screens, their growth prospects are explosive. The industry is expected to triple worldwide sales, to $9.4 billion, over the next six years. Yet Japanese electronics giants hold an overwhelming lead over the tiny U.S. industry.
So when Bill Clinton and his techno-wonks took office in January, the issue wasn't whether to give the fledgling U.S. flat-panel industry a vital boost, but rather how much and how fast. White House Council of Economic Advisers Chair Laura D'Andrea Tyson met with industry officials last February to map a comprehensive strategy. And on Apr. 30, the Pen-tagon's AdvancedResearch Projects Agency (ARPA) gave Troy (Mich.)-based Optical Imaging Systems Inc. (OIS) a government grant of up to $50 million to help build the nation's first large U.S.-owned factory for advanced flat-panel screens.
But this model of Clinton-style industrial policy has taken a jarring turn--one that raises questions about the Clintonites' ability to fashion a coherent strategy from their promises. On June 21, the Commerce Dept. dropped a bombshell that has flat-screen business boosters both baffled and fuming. Commerce revoked its 62% antidumping duties on imports of active-matrix displays, the most advanced and expensive form of flat panels. The decision is great news for Japanese companies, which already hold 95% of the market.
VACUUM POLICY. The official reason for the Commerce ruling is simple enough: OIS, which originally brought the dumping charges, withdrew its complaint last November. "Policy had nothing to do with it," says a Commerce official involved in the decision.
That's exactly what worries flat-panel makers. They see a crucial decision made in a vacuum--partly because Commerce Secretary Ronald H. Brown hasn't named a senior official to head trade policy. "This was done with no clear policy direction," says Charles P. Hoke, president of Standish Industries Inc., a maker of liquid-crystal displays in Lake Mills, Wis. "Somebody's going to have to take responsibility if we are going to get a comprehensive approach." Even a senior Administration official expressed surprise at the timing of the Commerce action: "We need to think about what all the agencies are doing at the same time as we are taking this away."
Critics of the decision suspect that politically wired business interests may have played a role. The Administration is siding with U.S. buyers of flat-panel displays such as IBM, Apple Computer, and Compaq Computer, which don't want to nurture an American industry if it means paying duties on Japanese-made components.
The computer industry also argues that duties are keeping jobs out of the U.S. by forcing them to manufacture notebooks in Japan. LCDs imported as part of assembled computers enter the country duty-free. The result: decisions from companies such as NEC Technologies Inc., which was gearing up to make notebooks in Massachusetts but oped to keep production overseas. But the industry has accelerated the drain by sourcing laptops and assembling overseas instead of investing in domestic production.
The Commerce action sits well with OIS. "The duties serve no purpose for OIS," says Rex Tapp, the company's chief executive. "With the duties in place, we couldn't establish long-range relationships with [computer] customers," who had moved manufacturing overseas.
SIGNS OF HOPE. U.S. flat-panel-display makers worry that the Administration may be more willing to subsidize handpicked companies such as OIS than to create a nurturing atmosphere for entire industries through a combination of trade, antitrust, and export promotion policy. "As an entrepeneur, I'm a little uncomfortable with this," says James M. Hurd, chief executive of flat-panel maker Planar Systems Inc. and head of the Advanced Display Manufacturers of America.
The industry has not given up on the Administration. Executives see a hopeful sign in a policy study by the White House National Economic Council expected in August. And over the next two years, ARPA, which the Administration expects to promote high-tech competitiveness, plans to invest $200 million to develop the flat-panel-display industry, on top of $250 million already spent. But after the Commerce decision, some U.S. flat-panel-display makers fear that without a clear-cut U.S. strategy, even that largess will amount to nothing more than shooting in the dark.