Table Of ContentRevitalizing U.S. Electronics
Lessons From Japan
John L. Sprague
Butterworth-Heinemann
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Copyright © 1993 by Butterworth-Heinemann, a division of Reed Publishing (USA) Inc.
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Library of Congress Cataloging-in-Publication Data
Sprague, John L., 1930-
Revitalizing U.S. electronics : lessons from Japan /John L. Sprague
p. cm.
Includes index.
ISBN 0-7506-9223-5 :
1. Sprague Electric Company—Management. 2. Electronic Industries—United States—
Management—Case studies. 3. Electronic industries—Japan—Management—Case studies.
I. Title
HD9696.A3U614 1992 92-54696
621.381Ό68—dc20 CIP
British Library Cataloguing-in-Publication Data
A Catalogue record for this book is available from the British Library
Butterworth-Heinemann
80 Montvale Avenue
Stoneham, MA 02180
10 9 8 7 6 5 4 3 21
Printed in the United States of America
Dedication
I dedicate this book to my father, Robert C. ("R.C.") Sprague, who
died at the age of 91 on September 27, 1991. Educated at the U.S.
Naval Academy, the Naval Post-Graduate School, and at MIT, "R.C."
founded what was to become the Sprague Electric Company in the
kitchen of his home in Quincy, Massachusetts in 1926 while on active
duty in the U.S. Navy. The first product was a radio tone control which
he had invented. However, it was an entirely new miniature fixed paper
condenser, or capacitor, that was part of the tone control that created
the future of his company. Sprague Electric grew to become one of the
world leaders in electronic components due to his genius, the out-
standing executives he was able to bring into the company, and con-
tinuing leadership in materials technology.
Active throughout his life in numerous endeavors both within
and outside of the electronics industry, he also served his country as
an expert on continental defense during the Eisenhower years. Of his
many honors, probably the most prestigious was his 1978 receipt of
the Electronic Industry Association's highest award, the Medal of Honor,
for the second time. No one else has ever been so honored.
Having helped build an industry, he served as a superb role model
for legions of executives who knew him and especially those who were
lucky enough to work for him. His passing leaves a void that will be
impossible to fill.
VI
Acknowledgments
So many people helped me out in the writing of this book that it
is difficult to give full credit to all of them. The "Notes and Sources"
section at the back of this book provides a list of some of the most
influential. Of this group, I would especially like to thank Dr. Sei-ichi
Denda of Konica for his insightful inputs over a number of years;
Darnall Burks and Mikiya Ono of Mitsubishi Materials along with
Galeb Maher of MRA Labs for much of my education in electronic
ceramics; Jack Driscoll of Murata Erie North America for helping
organize my highly fruitful visit to Japan in June of 1991; and Peter
Maden of Sprague Technologies for his unflagging defense of the
U.S. passive components industry. I would also like to thank Dick
Morrison and his staff at Allegro Microsystems, formerly the Sprague
Semiconductor Group, for their inputs on the semiconductor history
of Sprague Electric, and Lennox Lee of Sprague Technologies for his
highly important industry marketing data. Additional gratitude goes
to Ed Getchell, president of Venture Founders, for his insight on the
venture business and advice to find a corporate partner for NEWCO
rather than equity.
Last, but certainly not least, I must thank my family, especially my
wife, Jid, who over two years read parts of the manuscript and, without
complaint, accepted a hiatus on much of our social life; my daughter,
Cathy, who taught me handbuilding pottery; and my son, Bill, at
Smith Barney who shared his thoughts on the U.S. economy and cost
of capital. I am also indebted to my cousin Peter Sprague, chairman of
National Semiconductor, for numerous lively debates concerning the
U.S. semiconductor industry. While we didn't agree on everything, we
certainly stimulated each other's thinking.
VII
Introduction
When I was first approached about writing a book comparing
United States and Japanese competitiveness in the electronics industry,
I questioned what new I could add to the volumes that have already
been written on the subject After all, I certainly am not a professional
writer, nor am I associated with a large and prestigious consulting firm.
I am not a learned academic or dean of a well known business school.
On the other hand, I do have some reasonable credentials, and
many of them are of a practical nature directly applicable to the sub-
ject. For one thing, I have some pretty good genes relative to the elec-
trical and electronics fields. For example, my grandfather, Frank J.
Sprague, was a well recognized inventor and is considered the "father
of electric traction." His son—and my father—"R. C." Sprague started
the Sprague Specialties Company (later to become Sprague Electric)
in the mid-1920s by inventing a radio tone control in his kitchen. His
later development of a radically new capacitor to make the control
work led to Sprague Electric's position as the world leader in capacitors
by the 1960s.
My education led me down much the same path my father had
taken. I received my A.B. degree in chemistry from Princeton and
followed that with three years of active duty in the U.S. Navy during
the Korean War. Two years of my service was spent in shipboard
electronics. After the Navy, I received a Ph. D. from Stanford in physi-
cal-inorganic chemistry. My doctoral thesis was on semiconductor ma-
terials and devices.
After leaving graduate school, I joined Sprague Electric as a re-
search scientist. I spent nine years in corporate research and develop-
ment, eight years as head of the semiconductor division, five years
as president and chief operating officer, and finally six years as chief
executive officer. Between 1977 and 1987, I traveled extensively in
Asia, partly as a result of serving for ten years as a director of Nichicon-
Sprague (N-S), a joint venture between Sprague Electric and the Japa-
nese firm Nichicon.
During my 28 years with Sprague Electric, I learned how to "part-
ner" as well as compete with Japanese companies in world markets. As
I thought about such experience and my background, my writing a
book about how U.S. and Japanese corporations compete in electron-
ics didn't seem so far-fetched after all—but only if I could support my
IX
X Revitalizing U.S. Electronics
conclusions with detailed personal experience and make the narrative
interesting. Thus, once I decided to proceed and my outline was
accepted by my editor, this book began to develop a much more
personal tone than is generally found in such treatises.
I wanted to discuss the entire commercialization process, from
innovation to manufacturing to serving the market place. I also wanted
to deal with some of the misconceptions we as a nation have concern-
ing the relative strengths and weaknesses of the United States and
Japan. For example, it is true that the United States remains the world's
most innovative nation. All too often, however, Japanese firms are the
ones that capitalize on such innovations. But it is frequently U.S.
corporations themselves, through such methods as technology licens-
ing and partnering arrangements, that have made it possible for Japa-
nese corporations to do so. And Japanese skill in commercialization of
technology and manufacturing is not the result of some government-
directed conspiracy but instead is a matter of emphasis and resource
allocation, starting with the Japanese primary school system.
I am a "free trader" by philosophy. However, as my research pro-
gressed I was surprised at how unequal the playing field really is,
especially when it comes to the relative ease Japanese firms have in
penetrating the United States market compared to the problems U.S.
firms have in serving Japan. I also agonized over whether or not it is
really possible, or even appropriate, for the U.S. government to de-
velop an effective industrial policy. I was also surprised—and some-
what relieved—to find cracks developing in the Japanese monolith.
All these issues plus many others are discussed as the book progresses.
However, I am getting ahead of myself. My education concerning
Japan really began in detail when I made my first business trip there in
1977. The description of that trip that follows clearly shows how much
there is to learn about how a different society and economic system
operates, lessons best learned through personal experience.
John L. Sprague
CHAPTER 7
Sprague in Japan: Expectations,
Realities, and Some Lessons
V
iewed from the airport lounge window, the airplane at the end of the
jetway looked like a reject from the Boeing production line. Fore and
aft, it was a conventional 747. Much of the center of the aircraft was
missing, however, giving it a short and squat appearance. It was a 747SP
(special purpose) jumbo jet, and it was the airplane that was going to
take me on my first trip to Japan. At the time, the 747SP was the only
commercial jet that could fly non-stop from the United States main-
land to Japan. This added performance was accomplished by removing
approximately 100 seats and part of the central section from a con-
ventional 747.1 flew the 747SP many times over the next several years.
Each time I silently applauded the American aerospace industry for the
fact that such an apparently unbalanced aircraft could fly so well.
It was early 1977 when I made my first trip to Japan. At that time, I
had recently been made president and chief operating officer of the
Sprague Electric Company, a major worldwide manufacturer of elec-
tronic components. Sprague had a rich heritage in capacitors and was
also a niche supplier of semiconductor integrated circuits (ICs). I had
managed the IC business unit for eight years before I became Presi-
dent The primary reason for this first visit to Japan was to meet with
our Japanese semiconductor sales agent, Sanken Electric Company.
Unfortunately, Sprague was not then enjoying the same success as
Boeing when it came to successfully moving its products from the
United States to Japan.
Because of the length of the flight, I was armed with voluminous
reading material, including a detailed status report on Sanken, inter-
nal Sprague reports, several technical magazines, and two books of a
lighter nature. In addition I had brought an "instant Japanese" course,
hoping to learn at least a few words. This would turn out to be of little
use, except to provide me with a few polite phrases. As with most
Americans, my lack of knowledge of the Japanese language was to
1
2 Revitalizing U.S. Electronics
prove a severe disadvantage, especially during business negotiations.
Most of the Japanese I have met understand at least some English and
a sui^rising number are fluent Some have studied or worked in the
United States, or learned the language through self study. In addition,
English is required in the Japanese school system. (This was brought
home to me while visiting a shrine in Kyoto on a later trip. A young
student broke away from her group, came up to me and proudly said,
"herro, how are you??M Pronunciation of the letter "L" is a problem for
many Japanese, since their language has no fully equivalent sound.
After I replied, "I am fine, how are you?", she ran giggling back to her
friends and the little girls in their Navy-like uniforms moved off en
masse down the street.) However, being able to speak a language is not
the same thing as being able to understand a culture or society. Most
Japanese I knew still had nearly as much difficulty understanding our
society as we did theirs unless they had actually lived in the United
States for some time.
Another part of the "baggage" I carried was a mixed set of precon-
ceptions about Japan, some negative and some positive. On the nega-
tive side there was a certain amount of distrust relative to Japanese
business practices, primarily a subliminal carry-over from the attack on
Pearl Harbor and World War II. Even over 50 years later, the anniver-
sary of the "day of infamy" resurfaces these feelings like a running sore
that will not heal. On the other hand, Japanese executives that I had
met in the United States prior to this trip were—almost without excep-
tion—intelligent, articulate, good businessmen, and a pleasure to be
with. Because of these conflicting notions, I was not sure what Japan
would be like. I anticipated an extremely crowded country populated
by industrious people with an extraordinary national pride. Those
individuals I knew who had actually lived in the United States admitted
that life here was much pleasanter than in Japan. Still, they all wanted
to eventually return home. Their primary concern was the westerniza-
tion of their family, especially the children.
Since I sleep poorly while flying—despite wine, food, movies, read-
ing, and conversation with my neighbor—the flight seemed endless.
I departed Kennedy airport in New York late on a Saturday morning.
My plane flew "with the sun" and, because of the international date-
line, arrived late Sunday afternoon, some 14 hours later. Even before
landing in Tokyo, I had learned my first lesson about doing business
in Japan: try to arrive on a Saturday, thus allowing a day of recovery
and relaxation before getting to work.
I arrived in a stupor, not at all sure how I could manage my
meetings the next day. Customs was short, since I had carried every-
thing on board. The trip into Tokyo was eased by the fact that Kerry
Sprague in Japan 3
Enright, Sprague's sales manager in Japan, had met my plane. How-
ever, we got caught up in the evening weekend traffic back to the city
and it was slow—stop and go—the entire way. I later learned that
traffic around Tokyo is like this most of the time. The Tokyo drivers
were apparently used to it They flashed their lights a great deal, but
never used their horns.
After what seemed like hours, we arrived at the Tokyo Hilton.
Unlike most of its American counterparts, it was a surprisingly beauti-
ful hotel. Nearby was the Imperial Palace. I shared a light dinner with
Kerry and agreed to meet him the next morning for breakfast. After
that, we would head for the Sprague office and prepare for the meet-
ing with Sanken. I returned to my room, which was quiet, pleasant,
and whose atmosphere was accented by the oriental decor. I headed
straight to bed and fell instantly to sleep, only to wake several hours
later and sleep fitfully until morning. I learned my second lesson: a
sleeping pill is a big help the first night in Japan.
At breakfast, I was slightly dizzy from lack of sleep. (I learned a
third lesson: Japanese ham and eggs are best left to other diners!)
Afterwards, Kerry and I took a taxi to the office. Our taxi was cleaner
than any American equivalent I had ever experienced, and was in fact
cleaner than most private cars. It was a good place to take my first
look at Tokyo in the daytime.
What I saw was a huge, clean, sprawling city of contrasts, very
crowded, and filled with hurrying people and automobiles. Modern
high-rises, old houses, pagodas, small shops, little parks, and giant
stores all vied for the much too limited space. The Sprague office was
down a small side street and, much like Tokyo itself, spartan, congested,
and a beehive of activity. Compared to similar offices in the United
States, it was more like what you would expect of a new, cash poor start-
up than the Japan headquarters of a major international corporation.
The cramped office didn't seem to bother the six or so employees.
They were all young, bright, energetic, smiling and very happy to meet
"the boss." As we got to know each other, they would also prove to be
surprisingly outspoken on what was good about Sprague Electric—
and what was not Their criticisms focused on how their customers
were being hurt by missed delivery promises in addition to a rash of
quality problems related primarily to cosmetic variations in visual
specifications. I was not surprised about the delivery complaints. On
my regular visits to sales offices around the United States, missed
deliveries with most Sprague Electric product families, including ca-
pacitors, were the source of repeated complaints. However, quality
problems were almost non-existent. You might have difficulty in get-
ting a Sprague part, but once you did it was invariably of higher per-
4 Revitalizing U.S. Electronics
formance than the competition and almost never failed. I could not
understand why our customers in Japan would have complaints about
quality while our American customers did not.
In preparation for the afternoon meeting, Kerry and I reviewed
the history of the Sanken relationship. After several years of attempt-
ing direct sales of ICs to the Japanese market with poor results,
Sprague had decided to try working through a trading partner or sales
agent At the time, Sprague's semiconductor division was just too small
to even consider going direcdy into manufacturing in Japan. However,
we felt that somewhere down the line a joint venture along the lines of
Nichicon-Sprague (N-S) might be in order. N-S was Sprague Electric's
highly successful Japanese venture in solid tantalum capacitors with
Kyoto-based Nichicon Capacitor. As a matter of fact, Sanken's name
came to us from Nichicon, who we had first approached but who had
shown no interest in the semiconductor business. With semiconductor
revenues under $100,000,000, Sanken seemed an ideal partner. They
were already manufacturers of discrete power transistors and hybrid
circuits, and were also representing Fairchild Semiconductor in ICs
unrelated to the Sprague products. In addition, they seemed anxious
to sell the Sprague line. On the other side, the relationship would allow
Sanken to serve their customers with a new family of state-of-the-art
semiconductor components.
The initial products involved were Sprague's proprietary series
ULN 2000 Darlington arrays, a family of high voltage, high current
arrays. They were comprised of seven silicon NPN Darlington pairs
integrated into a common monolithic silicon substrate. The Darlington
configuration (see Figure 1-1) behaves like a single transistor with very
high gain. The circuits were designed to provide the current carrying
and voltage-sustaining capability required when logic circuits must
control peripherals such as relays, solenoids, card punches, printer
heads, tungsten filament lamps, and LED displays.
—o COM
7.2K 3K Ί
■H-
rh
Figure 1-1: Typical Darlington configurations in Sprague Electric
(now Allegro Microsystems) ULN 2000 series.
