The U.S. Can't Afford To Lose Laptop Knowhow

With each decade, another huge chunk of the U. S. electronics industry passes to Japan. In the 1990s, the fastest-growing segment of the computer business, laptop computers, could slip away. Chances are slim that the trend can be reversed, but there are steps that can be taken now to ensure that the U. S. doesn't get knocked out of the arena altogether.

The history of the flat-panel display, the most important component in laptops, is worth pondering. The most common type, the liquid-crystal display (LCD), was born in U. S. research labs, and small U. S. companies are still the research leaders. But Japan's electronics giants are the only companies that have plowed money--major players have budgeted more than $200 million per year--into building the large-format LCDs used in computers. Japan's Sharp and Toshiba, with strengths in consumer electronics that U. S. companies no longer possess, can spread the investment in flat panels over televisions and bigger computers, both of which will use such displays in the 1990s. They can also draw on their expertise in semiconductor fabrication, which resembles the process of making LCD screens.

Even in the absence of U. S. competition, the Japanese electronics giants appear to be offering flat-panel displays in the U. S. at prices that can't be refused--just as they did for color TVs. A preliminary Commerce Dept. finding that the Japanese have been dumping such displays in the U. S. ought to give a welcome psychological boost to America's beleaguered LCD makers. But even the threat of penalties isn't likely to slow Japan down.

It is vital that the design and assembly of laptops doesn't go the way of the LCD and the memory chip. U. S. laptop makers must retain some manufacturing knowhow. They already depend on Japanese rivals for memory chips and other key parts, as well as displays. Computer makers may be tempted to simply purchase whole systems overseas, which would have devastating effects on related industries that share the so-called food chain of electronics technology. The U. S. now has a rich stock of high-tech businesses that are world leaders in everything from designing custom integrated circuits to writing software. If building laptops ceases in the U. S., this fragile infrastructure that includes production-related software--the key to competitive electronics in the 21st century--will quickly wither away.

Before it's here, it's on the Bloomberg Terminal.