US-Japan trade dispute moves to supercomputers. Japan has launched an assault on the US supercomputer market, but some say its chief weapon - large price discounts - is unfair.
In a competition that offers a snapshot of a high-tech trade dispute, the Massachusetts Institute of Technology next month will choose a company to build a supercomputer for the university. Three American manufacturers of the state-of-the-art machines are going head-to-head against three Japanese companies which are being investigated for allegedly using extra low prices to break into the US-dominated market.
Clayton Yeutter, the United States trade representative, is investigating the charges of supercomputer dumping. Dumping is the sale of imported merchandise at below cost. To some in the computer industry the charges sound a familiar theme.
``This is a repetition of the old story: Godzilla meets Bambi and then takes over,'' says Charles Ferguson, an expert on supercomputers at MIT.
The godzillas, in this case, are the Japanese electronics giants - NEC, Hitachi, and Fujitsu - eager to break into one of the most prestigious and profitable parts of the computer business.
Cray Research Company in Minneapolis and IBM in Armonk, N.Y., are the leaders in the number of systems installed. But some experts believe the Japanese have surpassed the US in supercomputer technology and are trying to win market share with price discounts.
The battle for supercomputer supremacy is also attracting the attention of the US defense establishment, which is concerned the Japanese will knock out the US manufacturers. Because they can process enormous amounts of information quickly, supercomputers are widely used in the design of weapons systems. For example, the Cray X-MP/24 makes 110 million calculations per second, 100 times faster than a normal mainframe.
Two weeks ago, the Japanese government agreed to resolve part of the dispute over supercomputers - the unwillingness of the Japanese government to buy US supercomputers. The Japanese insist on huge ``academic discounts,'' reportedly 80-85 percent of list price.
According to Steven Levy of BBN Advanced Computers, Inc. in Cambridge, Mass., two years ago Fujistu set a target of installing 20 supercomputers in Japan in a year. ``They told their customers, if you don't like it, return it. This makes it really hard to compete,'' Mr. Levy says.
The Japanese are pressing ahead with similar strategies internationally. Competition is intense to sign up US universities as showcases to later sell units to the limited number of business customers.
At Brigham Young University in Utah, computer-operations manager Gordon Bennett says the university last year bought a regular mainframe computer (not a supercomputer) made by Hitachi. ``You could say they made us an offer we could not refuse,'' Mr. Bennett says.
Giving away free equipment is a practice US companies are not happy with. As a result, the US has only sold supercomputers to Japanese commercial companies. In its agreement, the Japanese government accepted the concept of ``honest competition.''
``We're anxiously awaiting all the help we can get,'' says Steve Hemping, a vice-president at ETA Systems, Inc., a Minneapolis manufacturer of supercomputers that has seen a lot of activity in Japan - but has received no orders.
But it is the US market about which manufacturers are the most concerned. A year ago, the Houston Area Research Corporation (HARC) asked for bids for a supercomputer to help make Houston into a high-tech research center. The winning bidder was NEC, which had teamed up with Honeywell in the US. (The computer is built in Japan and marketed by Honeywell.) Although HARC has not disclosed what it paid to lease the computer, one bidder says it was ``substantially less than anyone else bid.''
While academic discounts are normal business practice by US computer companies, the US companies maintain that the Japanese importation of computers and subsequent gifts constitute unfair dumping.
The Japanese companies, as well as university officials, disagree.
Samuel Adams, a NEC spokesman says we intend ``to compete fairly and squarely.'' At one university involved in negotiations an official says, ``The discounts we are talking about are comparable to those received from an American company, if you want to count all the cost.'' In the case of MIT, the university is encouraging the computer companies to include a ``gift'' segment in their bids to win the supercomputer contract. This gift can include free hardware, software, maintenance - or cash.
Bill Bard, an official at the University of Texas at Austin, says the Japanese did not offer any unusual ``academic discounts'' when the university was shopping for a supercomputer last year. Mr. Bard says one of the reasons the university chose a Cray was the familiarity of the staff with its operation. Cray also agreed to give $3.7 million over five years for student research on its machine. Also, the Japanese computers at that time were not as sophisticated as the Cray.
Today, however, the Japanese computers are at least comparable to the US computers. In fact, Sid Fernback, a supercomputer consultant in Alamo, Calif., believes the Japanese computers are better.
``They are faster and they have better software. If I were buying a supercomputer, I'd buy it from Japan,'' Mr. Fernback says. The main reason for the trade dispute, he says, is that some of the US companies are concerned that their profit margins will fall.
Cray, for example, had some of the top financial results among Fortune 500 companies. ``I think the US computers are overpriced,'' Fernback says.
Competition is expected to keep intensifying as demand for the big machines grows. Mr. Ferguson of MIT says, ``Every university with a substantial engineering faculty will want a supercomputer in the next several years.'' If the Japanese are as serious as the US trade representative portrays them, they will fight hard for these contracts, keeping the trade pressure on.