Cabinet to Discuss Japanese Firm’s Bid for Fairchild Semiconductor

In an unusual move, the Reagan Administration has scheduled a Cabinet-level discussion to weigh the trade and national security implications of a Japanese company’s proposal to acquire control of Fairchild Semiconductor, Commerce Secretary Malcolm Baldrige said Wednesday.

The planned deal “gives me great problems” because the would-be buyer, Fujitsu Microelectronics, would use Fairchild as a marketing network to sell supercomputers in the United States, Baldrige told reporters at a breakfast meeting.

But the Japanese refuse to consider buying American-made supercomputers, a category of computers that perform calculations at extremely high speeds, for their government agencies and educational institutions, he said.

Baldrige is adding his voice to the chorus of concern already expressed by the Pentagon and CIA over the Fairchild deal. Fairchild, based in Cupertino, Calif., makes highly sophisticated electronics equipment used in U. S. defense systems.

“We’re talking supercomputers. To me, that’s national security,” said Baldrige. “The subject will be discussed in all its ramifications.”

Although the transaction could not be blocked legally for trade reasons, those concerns do add weight to the critical review of the transaction’s other implications, such as its effect on the American defense and intelligence communities. Federal law does permit the government to block a sale that it believes could harm national security by providing sensitive technology to other nations.

The proposed deal, which would give Fujitsu an 80% stake in Fairchild, has been under discussion by government agencies since it was announced in October.

Rare Level of Consideration

The issue now has been deemed important enough to warrant a Cabinet discussion, a rare event for a business transaction. Baldrige did not indicate when the session is scheduled. No purchase price has been announced.

Baldrige said he fears that the U. S. supercomputer industry could suffer if the transaction is allowed.

“We’re being kept out of a Japanese infant industry. They want to keep the market for themselves,” Baldrige said.

“But they want to come over here and sell supercomputers.” Fujitsu, which has no supercomputer marketing or distribution network in this country, is “trying to buy Fairchild to get a very good system rather than start from scratch,” he said. Fairchild is a subsidiary of Schlumberger Ltd., an oil-field services company. Fujitsu Microelectronics is the American subsidiary of Japan’s Fujitsu Ltd.

The Fujitsu controversy comes at a time when Congress is particularly angered by what it views as unreasonable Japanese trade barriers to American goods.

Members of Congress “feel much more strongly than they did a year ago,” said Baldrige. “The level of feeling is higher than I’ve ever seen before.”

The legislators “are getting tired of listening to Ambassador (Clayton K.) Yeutter (the U. S. special trade representative) and myself going up to Capitol Hill to testify that things will be all right,” he said.

However, Baldrige expressed some sympathy for the Japanese viewpoint, saying: “I can put myself in their shoes.”

The rise in the value of the yen, which makes Japanese exports more expensive in dollars, has “hurt many medium and small businesses,” he said, and Japan is “having domestic economic and political problems.”

Japanese business executives “don’t feel this is the time to give much,” he said. “They’ve heard talk in the past from the United States without action to back it up.”