Did NEC "Dump" Its SX-4 Supercomputer?

Background on the NEC vs. Cray face-off

NEC had filed a suit with the Court of International Trade (CIT) in October last year seeking suspension of the antidumping investigation. The CIT this March denied NEC's request for a preliminary injunction, but the court was scheduled to start the trial in April to rule on this unprecedented action toward the US government by a Japanese computer manufacturer.

The dispute dates back to early 1996, when the US National Center for Atmospheric Research (NCAR) selected the NEC SX-4 as the winner of its supercomputer procurement bidding process. In May 1996, however, the DoC notified the NCAR and the National Science Foundation (NSF), which funds the NCAR, that the offered price of NEC's SX-4 supercomputer constituted a possible case of dumping. And in August, Cray Research - a loser in the NCAR bidding process - filed a dumping petition against NEC with the DoC. This forced the NCAR, which had been using Cray products, to put acceptance of the winning NEC bid on hold.

Since then, the DoC has been investigating the case. NEC filed suit at the CIT in October, however, charging bias on the part of the DoC. NEC's suit sought suspension of the DoC's antidumping investigation or, alternatively, appointment of an impartial third party to conduct the investigation. The CIT denied NEC's motion for the preliminary injunction, and the case was set to come to trial in April.

In refuting the DoC's preliminary finding on NEC's dumping margin, NEC has charged that the calculation was based "solely on the DoC's own data and/or on information provided by Cray Research, Inc." The statement released on April 1 under the name of Masao Toka, NEC's executive vice president, goes on to charge that "this dumping investigation was targeted at preventing supercomputer procurement from outside the United States, and it is based on an unfair and biased DoC investigation centered on information from Cray."

According to NEC, Cray lost in the bidding process due to the failure of its supercomputer to pass the required NCAR technical tests. Yet despite this failure, says NEC, the DoC took an "unlawful action" to prevent the NCAR from procuring a supercomputer from outside the United States without taking the prior legal steps called for under the World Trade Organization (WTO) regulations on dumping cases. NEC has also protested that the DoC personnel who prepared the documentation (on which the preliminary finding was based) performed their duties incompetently and irresponsibly; NEC has requested an investigation by the US Inspector General. These allegations,however, have all been denied by the DoC.

There may be some validity to NEC's claim that there was a political motive for the move, based on evidence uncovered by NEC that the DoC organized five meetings between governmental agencies and departments about a month before sending the letter to the NCAR and NSF. A number of high-ranking officials attended these meetings, and several hundred documents were submitted to the DoC.

Regarding the dumping charge against NEC, a major Japanese trade organization, the Japan Electronic Industry Development Association (JEIDA), also issued a statement in early April to express its"regret." "We cannot but feel that there is something unfair in the US government procurement procedure," says the JEIDA statement, "when we consider the fact that, so far, there has been no procurement of made-in-Japan supercomputers by the US government agencies in which the most state-of-the-art technological research and development have been carried out." Japanese industry insiders, however, are viewing the situation coldly. "Other supercomputer vendors think this is just the business matter of one company - a consequence of NEC's too-aggressive attempt to seize the public sector in the US," says an industry analyst. "For NEC, it was very important to get an order from the public sector in the US, the center of supercomputer installation, no matter how little profit the order itself brought. This is because getting an order from the public sector in the US also brings about more orders from the private sector later."

In the Japanese market, NEC is a latecomer compared with the other top supercomputer manufacturers, Fujitsu and Hitachi. To expand its market share, NEC has been focusing on the public sector market, and has succeeded in winning orders from such public agencies in Japan as the National Research Institute for Metals, the Japan Marine Science and Technology Center, the National Cardiovascular Center, and the Geographical Survey Institute. NEC has also won contracts from the National Aerospace Laboratory and the National Institute for Environmental Study.

Based on the DoC's calculation of NEC's dumping margin, the International Trade Commission (ITC) intends to make its final analysis of the situation in September. This will include determination of the existence and the extent of injury to the US supercomputer industry. Meanwhile, NEC has said that the company will not release information on the pricing and costs of the system involved in the NCAR supercomputer bid until the ITC begins its analysis.

In addition to the NCAR bid, NEC has won several major contracts for its SX-4 supercomputer in Europe. Fujitsu and Hitachi have also been successful in marketing their supercomputer systems outside of Japan. Fujitsu recently won a contract for its VPP700 system from the European Center for Medium Range Weather Forecast, and Hitachi received a contract from Cambridge University for its SR2201 system.

Internet Dial Roaming Service Launches

The announced dial roaming service will allow subscribers to connect to the Internet even while traveling outside of their home country, without having to place an international phone call to their own Internet service provider (ISP) or sign up temporarily with a foreign ISP. For example, subscribers of Dream Net, an ISP established by NTT Data and Softbank, can access Dream Net through over 300 access points in the US provided by MCI; the same account ID will be valid no matter where the subscriber logs on from.

The planned service charge is ´300 per month as the basic Internet dial roaming fee, and JPY 900 per hour for Internet access (plus the cost of the local telephone call). The three companies plan to cooperate further in the development of security services and other value-added services.

Japan's PC Server Market Grows Almost 90%

Dataquest (of the Gartner group), meanwhile, has pegged 1996 PC server shipments at 113,600 units, a 70% increase from Dataquest's figures for the previous year. Dataquest places NEC first in both 1995 and 1996, with Compaq 2nd in 1995 and falling back to 4th in 1996.

Regarding the overall market situation, IDC says that the reason behind the drastic growth of PC server shipments in Japan is an increasing need for PCs in the workplace, and the expanding penetration of LANs (local area networks) in corporations. IDC Japan also points to increasing interest among businesses in using the Internet and building intranets as a contributing factor.

Dataquest, meanwhile, suggests that the 1996 market growth was triggered by such factors as the use of PC servers for groupware or Web servers, and a growth in PC server needs among small and medium-size companies owing much to lower product prices and expansion of vendors' sales channels. The change of marketing strategy by the top vendor, NEC, which is focusing on the PC server market to replace the traditional ofucon (office computer) market, is also cited by Dataquest.

Regarding NEC's favorable sales results, IDC Japan says that NEC's mainstream Express series, which shipped 73% more units in 1996 than in the year before, contributed greatly to overall growth of the company's PC server sales. In total, NEC's shipments of PC servers accounted for 18.6% of the total market in 1996, according to IDC. (IDC excludes NEC's MIPS-based Express 200 and 700 from these totals, since it defines a PC server as one with an Intel-based CPU.)

Regarding Compaq's fall in the rankings, Dataquest observes that this is because Compaq was weak in product support and maintenance, and lacked experience for expanding its sales channel and entering the ofucon replacement market.

Novell, Oracle
Announce
Japan Alliance

"We will offer 'freedom of choice' in the network business market, currently dominated by Windows NT, by fully considering users' needs," said Shigechika Takeuchi, president of Novell Japan. "As part of the effort, we, Novell Japan and Oracle Japan, have decided on a tie-up in the network computing businesses that can help corporate users save on 'total cost of ownership'."

Novell Japan and Oracle Japan will cooperate for business expansion through joint marketing/sales promotion of Novell's IntranetWare combined with Oracle 7 (Release 7.3), joint marketing/technical support for integration of Oracle's Web Application Server and Network Computing Architecture into IntranetWare, and the porting of Oracle DataBases to various operating systems with Novell Directory Services.

Oracle Japan president Chikara Sano stressed that the Oracle/Novell alliance has one primary objective: to beat their common enemy, Microsoft. "The current monolithic structure of the IT (information technology) market, due to [the dominance of] one particular vendor, is hindering the healthy growth and activation of the market," said Sano. "We would rather offer open and wide-ranging opportunities to users, so that they can select appropriate products and services based on their own free choice."

Novell/Oracle's "freedom of choice" comparison list
Server OS:	Novell IntranetWare	Microsoft Windows NT
RDBMS:	Oracle DataBases	Microsoft SQL Server
Groupware:	Novell GroupWise	Microsoft Exchange Server
	Lotus Notes
	Netscape SuiteSpot
Open architecture:	Oracle NCA	Microsoft ActiveX
Desktop AP:	JustSystem Ichitaro	Microsoft Office
	Lotus SuperOffice,
	KONA
	Sun Java Studio
Development environment:	SunJava, JavaWorkshop	Microsoft MS VB, VC, VJ

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