Supercomputers, the premier high-technology product in the world, have become economic and political footballs between Japan and the United States.
Supercomputers are the biggest and fastest computers made. They are so elite that only five companies make them, and the average price is more than $10 million.
Two of these five companies are American. One is the inventor of the giant machines and still leads the field. The other is a subsidiary of an early player in the once exclusive game and was the second entrant in the field.
The newer entries, since 1983, are owned by three of the largest semiconductor manufacturers in Japan.
And here`s where politics comes in.
Cray Research Inc., headquartered here, has 62 percent of the worldwide market for supercomputers and its machines have set the performance standard since they were introduced in 1976. But Cray never has sold a machine to the Japanese public sector and has just seven installed there in the private sector.
”We find it odd that we have a U.S. company making the best product in the world, which is sold everywhere else in the world, but not to the Japanese government or universities,” said a spokesman for the office of the U.S. Trade Representative.
One reason, according to American officials who have negotiated with the Japanese, is that Japan intends to rule the world supercomputer market.
St. Paul-based ETA Systems, though still struggling to be accepted as a first-string player with its line of supercomputers, is a subsidiary of Control Data Corp., which began making its Cyber 205 supercomputers in 1980.
Seymour Cray, who founded Cray Research in 1972, was a founder of Control Data in 1957.
”Control Data has been in Japan for 20 years and has never sold a supercomputer over there,” said Lloyd Thorndyke, former senior vice president of Technology Development at Control Data and now president of ETA, which took over Control Data`s supercomputer operations Jan. 1.
Meanwhile, almost all the sales by Japanese companies–NEC, Fujitsu and Hitachi–have been in Japan, with only a few in Europe.
The Japanese have made one sale in this country, an NEC model sold to Houston Area Research Consortium at a sharp discount.
”We just couldn`t compete with the deal they offered. It was the first time we`ve ever found our-selves in that kind of situation,” said Cray spokesman John Swenson.
Both American companies worry that the Japanese will try to sell the machines below cost here to build market share. History shows this concern is not without basis.
Gumucio said Japan`s weakest area is marketing and the lack of a customer base. But two of the three Japanese firms have joined forces with American companies–NEC with Honeywell Inc. and Fujitsu with Amdahl–to establish a beachhead with customers and get distribution here, he said. Hitachi has not entered the U.S. market.
Cray and ETA are especially concerned about the ”Japan first” syndrome they run into when trying to sell in that country, considered by many the fastest growing marketplace for supercomputers.
A State Department cable, recently published, described U.S.-Japanese talks in January about supercomputers that indicated the Japanese government`s intention to take over the world supercomputer market.
According to the cable, a Japanese trade official said his country is unwilling to improve Cray`s access to the Japanese market. Japan`s goal, it said, ”is eventual domination of (the) international computer market.”
A version of the same conversation by the U.S. Special Trade Representative`s office is even stronger. According to officials there, the Japanese said there was no point in Cray even trying to sell supercomputers there.
The Japanese official suggested, however, that the Americans might have a chance if a big U.S. company such as International Business Machines Corp. bought Cray and then sold supercomputers at huge discounts. American companies are simply too small to compete in Japan, especially given the deep discounting practices prevalent there, he said.
But today`s tense U.S.-Japanese trade relations could have a backlash that might benefit Cray.
Cray has gotten two orders from the private sector in Japan since the U.S. administration placed punitive duties on some Japanese consumer electronics exports.
Cray points out that both orders came from previous customers. Nippon Telephone and Telegraph ordered its third Cray computer, and Century Research Center Corp. bought an upgrade model.
In a way, Cray fears it has become a pawn in the trade wars.
”The supercomputer industry has become a microcosm of what is going on on a larger scale,” said Gumucio. ”Don`t get me wrong, we`ll take everything we can get, token or not. But we don`t want to let these orders obscure the bigger issues.”
Supercomputer analyst Gary Smaby, of Minneapolis-based Piper Jaffray Inc., thinks Cray might soon see an order from the Japanese government, despite earlier indications.
”The Japanese are shrewd enough to see what a great public relations ploy it would be,” Smaby said. ”These are highly visible products. What`s $20 million for a supercomputer if it eases tensions in semiconductors and consumer electronics markets, which tower over the supercomputer industry?”
At any rate, he suggested that the Japanese would not be foolish enough to aggressively dump supercomputers in the current atmosphere, since virtually every supercomputer contract signed makes headlines.
Cray is worried about the Japanese threat and anxious that the government stay involved in the issue. But the tiny superstar of the supercomputer world, which is expected to have revenue of $750 million in 1987, is not operating as if it has a target on its back.
Gumucio says that Cray`s best estimates indicate that 262 supercomputers
–163 of them Crays, 35 Control Datas and 64 Japanese–were installed worldwide by the end of the first quarter.
”We feel that the Japanese are gaining mostly at the expense of Control Data,” said Gumucio. ETA, which is behind schedule in its ETA 10, designed to be even faster than the most recent Cray on the market, has four contracts for the new machine.
According to Larry Smarr, director of the University of Illinois`
National Center for Supercomputing Applications, which uses a Cray X-MP model, some of the Japanese products ”look very strong from a hardware point of view.”
”But the total package is the real question. Software, training, support, available applications, how well it hooks in with other computers
–these are the critical issues. Cray has a 10-year head start here.”
As far as dumping goes, Smarr doesn`t think it`s a major threat.
”Supercomputers are premier items,” he said. ”Quality is everything. Price is secondary. I am a great believer in the quality of Cray.”
But according to Sidney Fernbach, a San Francisco-based consultant to the industry who recently completed a marketing survey for ETA, the Japanese impact could be considerable once they break into the market here.
”Since they entered the market in 1983, their growth curve stretches straight up,” Fernbach said. ”Don`t forget, these Japanese companies are going to have the first crack at high-performance semiconductors as well. Cray gets most of its chips now from Fujitsu. Fujitsu could just decide to keep all that technology for itself.”
Though Cray battles the Japanese dragon, the company whose name has become virtually synonymous with supercomputers has another problem to deal with: The appearance of a market for mini-supercomputers, which are smaller versions, between supercomputers and mainframes, for customers who don`t want or can`t afford the full model.
Also known as subCrays, near-Crays or Crayettes, these less costly machines are not really competition for Cray, which deals at the high end of the market. But they do compete for available funds.
”Some customers may compromise to buy the lower priced machines until they can afford a Cray,” said Gumucio. Smaby pointed out that with an average sale in the $10 million to $14 million range, Cray cannot really afford to gear down to support a customer who only spends $1 million.
”We see it as just one more thing to deal with,” Gumucio sighed.
The company`s stock slid recently when several analysts changed their
”buy” recommendations because Cray had only eight new orders in the first quarter. But Gumucio pointed out that it often takes 18 months to four years to sell a supercomputer, and quarterly analyses of orders are not meaningful. He reiterated the company`s plan to sign 50 contracts in 1987.
The company, in step with its style since its creation, remains upbeat.
”We want to compete based on the merits of our machines, on performance, not special deals,” Gumucio said. ”We really feel that the market is big enough for everybody on those terms.
”The more computer power we come out with, the greater the appetite out there,” he said. ”It`s like dealing dope. Users just keep demanding more speed, more storage, more main memory. We`ve worked hard to be No. 1. We`ll just keep fighting for everything we get.”
