Going even further back, to one of Japan's greatest success stories
Sony. What was Sony and why was it successful? Sony was founded in 1946 by Akio Morita and Masaru Ibuka. The first successful Sony product was the TR-63 transistor radio, the first mass produced miniature commercial radio, which went on sale in late 1957. It was the first time Japan cracked open the US consumer market and ushered in a new era of consumer electronics. By the mid-1960s there were millions sold in the United States.
Despite commercial success as early as the late 1950s, Japan never became a leader in electronics
basic research. The junction transistor (1947), integrated circuit (1959), MOS field effect transistor (1960), CMOS manufacturing process (1963), MOS DRAM Memory Cell (1967) and microprocessor (1971) were invented in the United States. Japan was also not a leader in software (operating systems, etc.) Japan was able to copy and improve U.S. technologies. At its height, Japan did develop the Fin field effect transistor in the 1980s, however the inventors went on to develop this technology with DARPA at UC Berkeley in the late 1990s and early 2000s.
Japan success can be traced to U.S. government policy.
In the 1940s the U.S. telephone network had consolidated into a monopoly American Telephone and Telegraph (AT&T). AT&T made extensive use of vacuum tubes to amplify sound signals to enable long distance phone calls across the United States. But AT&T's vacuum tube system required thousands of switchboard operators and it wanted a better way to automatically route calls. The research arm of AT&T was Bell Labs.
Bell Labs was arguably the most innovative industrial laboratory in the world at that time. Scientists at Bell are credited for the development of radio astronomy (1932), cellular telephone technology (1947), information theory (1948), solar cells (1954), the laser (1957), and the Unix operating system (1969).
It was at Bell Labs that
. Later on their manager moved to the San Francisco area where he grew up to start his own transistor company, and this was the start of Silicon Valley. Thus the United States is the birthplace of the global semiconductor industry, and has never lost its lead ever since.
How did Sony benefit from Bell Labs invention of the transistor? In 1949 by the administration of President Harry S. Truman, sought to break apart Western Electric, the Bell System’s manufacturing arm, from the parent company. Western Electric was overcharging AT&T, the government argued, and so was forcing telephone customers to pay higher rates. It also
A 1956 settlement the Bell System was obligated to license all its patents royalty-free and it was barred from entering any industry other than telecommunications. As a consequence, 7,820 patents or 1.3% of all unexpired U.S. patents in a wide range of fields became freely available in 1956. That meant that the company that held patents to the transistor, AT&T, could not benefit from the technologies that would emerge from it.
But even before the settlement, AT&T responded to the lawsuit by deciding to license the transistor. In April 1952, over 100 representatives from 40 companies gathered for a nine-day Transistor Technology Symposium, including a visit to Western Electric’s transistor manufacturing plant in Allentown, PA. After the conference, 30 companies decided to license the transistor technology for a non-refundable advance payment of $25,000 (∼ $220,000 in today’s dollars).
The
, as other companies like Texas Instrument, Fairchild Semiconductor, and Silicon Valley itself arose from using the technology. If the transistor had been the exclusive domain of Bell Labs, innovation would have been far slower.
However, Japan benefited as well. Japan likely benefited from the fact that the Americans probably underestimated them at the time. It was
, who heard that Bell Labs was going to license its transistor technology, and c
. Thus the beginning of the Sony TR-63 and Japan's successful consumer electronics industry.
This article 30 years later (May 1986) describes
:
"For 30 years, the industry has grown all over the world because of a universal policy of liberal licensing patents for for low royalties. TI in the U.S. wants to change this easy exchange of technology because, it says, the Japanese are exploiting cheap American technology to destroy the American semiconductor industry.
[Bell Labs decided to...] license its patent for a small royalty of about 2 per cent of the transistor's net selling price. It even organized seminars to unveil the "secrets" of its technology.
Bell's policy set the style for the licensing of patents throughout the electronics industry. As the industry gathered momentum, hundreds of patents soon became essential to the production of many different components for semiconductors. Bell promoted an exchange of patents, known as cross licensing. This form of exchange became standard. After all, no company could make semiconductors without making use of the wide range of Bell's patents. The consequences of cross licensing were momentous. The traditional role of patents, to give a company a monopoly of technology, was eroded, allowing the rapid spread of knowledge."
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In short, during the entire period of the initial rise of Japan, Inc., Japan benefited from the "Bell System" in electronics:
- Liberal patenting
- Low royalties
- Cross licensing
With the Semiconductor Protection Act of 1984, America realized the Asian threat (or "Yellow Peril", although such term is no longer used). Contrast that with today:
"Every couple of years, this story re-emerges, and everybody starts to talk about the upcoming expiry of x86 related patents. They were followed by several stories revolving emulation and the forthcoming flood of third-party implementations of compatible processors. But this never happens. Why?
We see some company releasing x86 compatible chip like . But most of these chips saw the light of day after the FTC forced Intel to allow other companies owning x86 IP to undergo mergers and joint ventures. Hence disseminating, under specific conditions, the capabilities to build x86 compatible chips.
Yes, x86 patents are expiring, but there is a never-ending stream of new one added every year protecting the most recent versions of the highly successful CPU architecture. And by most recent I mean, all the version that span the last 20 years (the lifespan of a patent). Intel has been jealously guarding its crown jewel and is not ready to let it go anytime soon."
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As we see, the NEC V-series processor, Japan's attempt to compete in the microprocessor space as it did in memories, failed due to x86 patents.
So what is the lesson in all of this?
- America has an industrial policy.
Japan was able to get away with some successes because America underestimated them at first. But once America realized the "threat" the legal hammer of patents came down on Japan. Ending the Japanese miracle.
- Basic research is important. Japan never had a lead in basic research. China is far behind on basic research and its companies still spend less than their American counterparts on R&D in some cases.
- China will know it is ahead when it can keep American companies out of leading edge technologies by holding patents.
