London-there is a new nightmare scenario for U.S. high-tech. And the big surprise? It doesn't involve the Japanese. That's a stunning turnaround. For decades, every self-respecting high-tech pundit predicted that, sooner or later, the Japanese would dominate the entire range of electronics industries. Japan's ability to mass-produce, to match American innovations and indeed to spawn its own knockout breakthroughs would destroy U.S. competitiveness. But a funny thing happened on the road to Japanese high-tech hegemony. The Japanese failed to innovate, their leading companies got bogged down in capital-intensive, low-profit businesses like memory chips, and consumer electronics never took over computing but instead became victimized by over-capacity and falling prices. U.S. high-tech, meanwhile, proved more adept at miniaturization, low-cost production and continuous improvement than anyone thought possible a decade ago.

As a result, the chieftains of U.S. high-tech no longer lie awake at night worrying about the bogeyman of Nippon. Today U.S. technology companies are the envy of the world. They hold a decisive advantage over Japanese rivals in virtually every aspect of electronics.