IP: Flat-panel effort -- fro the fukuzawa () UCSD EDU list

[David Farber <farber () central cis upenn edu>]

Flat-panel effort criticized Tech agency: Little chance U.S. will catch up
withJapan


By Lee Gomes


Mercury News Staff Writer


Some of the principle assumptions behind a major federal effort to create a
domestic flat-panel display industry have been challenged in a report by a
congressional agency, which also takes a pessimistic view of whether U.S.
firms ever will be able to catch up with Asian flat-panel competitors.


The Office of Technology Assessment -- which goes out of business Friday as
a result of Republican budget cutters -- called into question the
Pentagon's oft-repeated assertion that it needs to create a vibrant
American flat-panel sector for national security reasons.


Instead, the report said, the Pentagon might get a better deal if it did
what American computer companies do -- get their parts in Asia.


Flat panels are the display screens used in laptop computers and a new
generation of camcorders. In recent years, the federal government has spent
hundreds of millions of dollars trying to develop an American-based display
business, with various Pentagon agencies providing the lion's share of the
money. The Pentagon's plan has been to create an American industry that
sells to both the military as well as the much larger commercial
electronics market.


Pentagon planners have argued that relying on Japan for most flat panels is
a security threat to the United States. That's because, they say, flat
panels are playing an ever-larger role in high-tech weaponry, yet military
planners can't be assured of having either a steady supply of them or a way
of influencing their design.


But with flat panels increasingly becoming a commodity item, the OTA
questioned the Pentagon's logic.


For one, it said, Korea and Taiwan are both developing active flat-panel
industries, resulting in second and third sources for the devices. That
competition, in turn, has prompted major Japanese display firms, such as
Sharp Electronics, to take a much more accommodating stance with U.S.
military buyers. And in recent months, those buyers have had increasing,
contacts with Japanese suppliers.


With the odds seeming to favor continued dominance by Asian countries
because of the billions of dollars they have spent on their industries,
``it's not at all clear how government investments can help,'' said Paul D.
Semenza, chief author of the study.


Washington's recent flat-panel work is precisely the sort of effort favored
by many of the technology policy ``activists'' who came to power in the
Clinton administration. What's significant about the OTA report is that the
agency is usually regarded as being cut from the same ideological cloth as
the Clinton activists -- yet it came to a strikingly different conclusion
about a program that has darling status in some Washington policy circles.


Semenza noted the study said nothing one way or the other about the wisdom
of the growing investments by private American companies in various
flat-panel efforts. He did, though, say that if a successful U.S.
flat-panel industry is as important to high-tech companies as many of them
say it is, then those firms should perhaps be chipping in more money
themselves, and relying less on help from the federal government.


It's unclear what effect the report will have on Congress. The Republican
majority, after all, thinks so little of the agency that it did away with
it. And while those Republicans were hostile to nearly all Clinton-style
technology programs, they have made an exception to programs originating in
the Pentagon, including those involving flat panels.


There are three endeavors in the South Bay that rely, in part, on federal
funds: a high-definition display program at Xerox's Palo Alto Research
Center; a consumer-oriented manufacturing effort under way at Silicon Video
Corp.; and the San Jose-based U.S. Display Consortium, which gives grants
for display supply companies.


Consortium director Michael Ciesinski said that the bulk of the funds for
all three programs appeared to be safe, at least for the coming fiscal
year. They may become a problem in coming years, he said, as the defense
budget undergoes further scrutiny, and in that regard, the OTA study might
make it more difficult to convince Congress to keep the money coming.


The OTA report was circulated throughout the flat-panel industry for
comments; Ciesinski said the final draft incorporated many of the strong
criticisms that had been directed at it. He said, though, that he still
disagreed with some of its conclusions.


``We're much more optimistic about a domestic industry than the OTA is,''
he said.


Published 9/28/95 in the San Jose Mercury News.