Abstract

In 1980, the Semiconductor Industry Association (SIA) published a study prepared by Chase Financial Policy. The Chase study has become an important aspect of SIA lobbying efforts in the U.S. Congress. The study is a detailed examination of the capital financing characteristics of the U.S. and Japanese semiconductor industries. Estimates are made of the cost of capital and rate of return on investment for each country's principal semiconductor manufacturers. The basic findings of the study are: The Japanese semiconductor companies' size and diversity provide them with a financial advantage over most U.S. semiconductor companies. Japanese semiconductor companies employ significantly higher debt leverage than U.S. semiconductor companies. Japanese semiconductor companies are able to employ high leverage ratios because of their affiliation with large industrial groups, Japanese lending practices and a supportive government policy. The rates of return on capital of the U.S. semiconductor companies have been higher than the rates of return of the Japanese semiconductor companies.