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Japanese companies in the foreign electronics/entertainment industry are enjoying an increase in exports, due to the decline of the Japanese yen against the U.S. dollar. Earnings for computer chip manufacturers will probably improve in 1997, following the glut that caused prices to fall in 1996. Digital versatile disk (DVD) is a promising new technology that should contribute significantly to earnings by the end of the decade. The industry is ranked below average for year-ahead performance.

Foreign sales of Japanese consumer electronic products increased in 1996 with the weakness of the yen and lower prices for Japanese goods. Prices for memory chips from foreign companies fell 80% in 1996, but cuts in production from chipmakers will help prices stabilize. Digital video disks, which will replace video cassettes, have also reached the market in 1996. Many stocks in this industry are good investments through 1999-2001.

Investors who are interested in foreign electronics, consumer electronics, audio-visual equipment or semiconductor industry securities should base their decisions on the performances of individual corporations in these fields rather than the overall industrial performance which is ranked average with other equities. Consumer electronic sales have increased in Japan after a competition brought about price cuts in early 1995. New copyright laws will assist foreign companies introducing digital video discs.

The consumer electronics industry continues to expand in Japan and in Europe, but declining sales of silicon chips have caused price reductions and lower profits. Sales of personal computers and cellular telephones are expected to continue growing in the second half of 1996. The introduction of digital video discs and players should give the industry a boost. Investors should examine the financial reports of individual companies before deciding on stock purchases.

Foreign semiconductor industries are expected to show economic growth for 1996 despite reductions in memory chip prices. Increased Japanese sales of personal computers should boost both the foreign semiconductor and computer industry economic growth. British and Japanese business regulation reform will help foreign consumer electronic industries grow. However, most of these industries are not considered good short-term investments although a few companies might attract long-term investors.

Japanese consumer electronics have been easier to sell overseas, with the falling yen leading to increased profits. Demand for memory chips and semiconductors has increased with the boom in personal electronic devices, as well. One of the more promising consumer electronic formats is the digital video disk, also. Prospects for European companies are more mixed, however. These stocks must be individually selected for investment.

The global semiconductor trade agreement with Japan is due to expire in Jul 1996. US manufacturers are not as willing to agree to the expiration as other countries because foreign trade only represents a mere 23% of Japan's semiconductor market. New products in consumer electronics and personal computers are providing a growing Asian market and there is a new digital video disk standard. These stocks, however, are not recommended for investment in 1995.

Foreign semiconductor companies are profiting from strong computer chip demand and increased market share. Consumer electronic sales and earnings, however, have decreased. PolyGram and Philips have become the European leaders in both consumer and semiconductor sectors, but the strong yen is making profits for Japanese companies difficult. PolyGram and Philips stocks will outperform the market for the next three to five years.