Motorola?s announcement this week that it was pulling out of the DRam market, even though it is half-way through ambitious plans to build a DRam plant in conjunction with Siemens Nixdorf, reveals the mess the EU has pitched the industry into with its half-baked attempts to ?help? Europe compete with the Far East.
In effect, its help consisted of old-style interventionism which has distorted the market so badly that Europe looks as if it could lose most of its DRam capacity within the next five years. The latest brainwave from Brussels is to drop tariffs on 1 August, inviting a flood of chips from the Far East within days. It?s a funny way to run a Euro economy ? or it is incompetence.
Since the last over-reactive barrage of anti-dumping legislation, the market has been knee-deep in dubious grey market memory and prices have sunk below the sea floor. As one observer we quote said (after a few expletive-deleteds): ?The market is in freefall and duty will go down to zero in the year 2000.?
The EU has, some analysts claim, come to a gentleman?s agreement with the Japanese and Korean vendors. Unfortunately most of these types of agreements lead to pistols at dawn and a blood-soaked field. Only one party ever gets out of a gentleman?s agreement alive. That?s because they just don?t exist in real life. Anyone who tries to subvert market forces ends up with either a huge warehouse full of unshiftable boxes or a total success. There is no middle ground when the stakes are so high for the Far East. Intervention just doesn?t work.
There are indications that some European chip makers will not even bother to talk to Asian DRam importers until the laws on dumping move from the printed word to real action. They will wait for a long time for any coherent response. The reality is that the EU has passed a law but can barely enforce it. Eurocrats can shift vast paper mountains every day, but ask them to stop a consignment of DRams and you have asked the impossible.
Action is needed to protect the home-grown Dram market or it will go the way of so many other products that the Far East now has a monopoly of. Surely the EU is there to strengthen our product base? If so, what concrete action will it take to ensure that IBM, Siemens, SGS Thomson, Philips and Texas Instruments do not take the same decision as Motorola?
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