STARTING A FLAT PANEL INDUSTRY

Getting there firstest with the mostest is no longer as important in warfare as getting there with a gadget called a flat-panel display screen.

Liquid crystal display screens a few millimeters wide - like the ones in video games and laptop computers - enable jet pilots to target an enemy miles away.In the future, ground soldiers with handheld display screens or screens mounted on their helmets will be able to fight an unseen foe whom they watch on the screen's map.

The problem is that the United States doesn't make these screens.

A few U.S. firms have a toehold in similar technologies, but their presence is marginal. They lack the know-how and facilities to produce competitively priced, ultra-thin liquid crystal displays in the numbers that the Pentagon needs. Japan's Sharp electronics and a handful of other Japanese companies control 95 percent of the LCD world market.

The Pentagon doesn't like using firms halfway around the globe for key battlefield technology. That's bad enough. But according to a top Pentagon official, the Japanese firms have an allergy to the U.S. military.

"The technology leader that dominates the market today is plain unwilling to work with us. There are smaller companies that have varying degrees of

allergy," says Kenneth Flamm, a deputy assistant secretary of defense.

The Pentagon wants suppliers that will customize screens to operate in the desert or the Arctic, to fit a range of equipment and to match its sensors. The Pentagon also wants first dibs at new technology. U.S. firms usually cooperated.

But the Pentagon is a relatively small customer in the $5.6 billion flat- panel computer screen market. The Japanese have told it to stand in line and buy off the shelf like everybody else.

Frustrated, the Pentagon has turned to an approach that's proving controversial.

The Defense Department wants to spend $120 million a year "nurturing" a U.S. flat-panel display screen industry. "We need leading edge technology, we need early access, assured access. And frankly, we are not getting it now," Mr. Flamm said.

Subsidizing the start-up of an industry is nothing new, Mr. Flamm insists. The Pentagon has been nurturing companies that supply arms and equipment for 50 years. Government money has gone into development of everything from jet fighters to guided missiles. "This is just more of the same," he said.

Critics, however, were quick to spot a new wrinkle - or what they think is new. In an era of free markets, governments are not supposed to subsidize industries that are basically commercial. And there is already a huge commercial industry in flat-panel LCD screens.

Newsweek magazine recently ran a critical commentary under the heading: ''The New (Old) Industrial Policy - Using the Pentagon to subsidize commercial products is a bad idea." Such programs often turn into boondoggles and pork barrel.

Mr. Flamm says the Pentagon isn't proposing an industrial policy but ''technology policy." It will match U.S. companies (even Japanese companies in the United States) dollar-for-dollar to develop ways to produce screens here. The government is already subsidizing research in these areas. What it hasn't subsidized is efforts to turn that research into production. ''But what's the point if we can't build this stuff?" Mr. Flamm said. ''Why are we doing this?"

The Pentagon needs the screens. But something bigger is going on here.

The Clinton administration does not like watching this country fall by the wayside in computer screen technology. The White House would like nothing better than to have a handful of U.S. companies master this technology and make screens.

But American firms are already so far behind they aren't likely to enter this business without help. The Defense Department can give it. Claiming ''national security" to justify subsidizing an industry is less likely to upset world trade officials and trigger retaliation from other countries.

Alan Tonelson of the Economic Strategy Institute notes that there would be important commercial spillovers from developing a U.S. flat-panel display industry to supply the Pentagon.

These screens in the future will be incorporated into hundreds of commercial products. Countries with affordable flat-panel display screens will be more competitive in information processing, telecommunications and other electronic systems industries.

"This is information technology that will be critical to economic success," Mr. Tonelson said.

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