April 1, 1997
U.S. Finds Supercomputer Dumping by 2 Japan Makers
By JOHN MARKOFF
SAN FRANCISCO -- The Commerce Department issued a preliminary finding Monday that two Japanese computer makers, NEC Corp. and Fujitsu Ltd., were guilty of dumping by bidding below cost in an effort to sell a supercomputer to an American weather research laboratory.
The lab, the National Center for Atmospheric Research in Boulder, Colo., had chosen a $35 million bid from NEC offering four 32-processor SX-4 supercomputers in May 1996. But in July, Cray Research, which is now a subsidiary of Silicon Graphics Inc., filed an anti-dumping petition with the Commerce Department and the International Trade Commission, an independent federal agency.
If the Commerce Department upholds its initial ruling this summer, it would mean that NEC faces harsh penalties on the sale of any new supercomputers or the upgrades of machines it sells in the United States. The penalty for NEC could be 454 percent of the price of any system sold and for Fujitsu, 27 percent, if the initial finding is upheld.
But Cray officials acknowledged that the Commerce Department's figures had been based on cost data the company supplied after NEC executives refused themselves to provide data for the inquiry, arguing that the Commerce Department had provided them no chance of a fair hearing.
"There is a price to be paid," said John Greenwald, a lawyer representing Cray. "NEC refused to supply that information. I suspect it is because they examined their own data and didn't like the result."
An official of NEC said, however, that the Commerce Department had effectively blocked the company's bid in May 1996, releasing a "predecisional dumping analysis," a memo analyzing the bid, finding NEC guilty of dumping before the National Center for Atmospheric Research had announced its award.
"We felt we had zero chance of getting a fair hearing," said Samuel W. Adams, vice president for sales and marketing at HNSX Supercomputers, the American subsidiary of NEC. "When Cray filed its anti-dumping petition, we felt that Commerce had already prejudged and decided not to provide numbers."
In October, NEC filed a lawsuit in the Court of International Trade, a Federal court that deals with issues under American trade laws, seeking to prevent the Commerce Department from investigating Cray's dumping complaint.
Ten days ago, the court rejected a request by NEC for a preliminary injunction that would have stopped the Commerce Department from issuing its preliminary ruling.
Computer industry analysts said NEC may have erred in not providing its cost data. Cray executives said they thought their rival had forfeited any chance of presenting that data to the Commerce Department in the future. "I didn't understand why NEC refused to release any numbers," said Howard Richmond of the Gartner Group, a market research firm in Stamford, Conn. "It tends to weaken their case."
The ruling is complicated by the fact that the National Center for Atmospheric Research, an agency financed by the National Science Foundation, structured the bidding process to buy an older-style vector supercomputer rather than a newer, massively parallel computer. Vector supercomputers, designed for a market that had been dominated by Cray Research for several decades, use specialized hardware requiring liquid cooling. These machines generally use only a small number of very fast processors.
Massively parallel machines, which are made from hundreds or thousands of microprocessors, dominate the supercomputing market today, and the vector machines have lost significant market share to them in recent years.
The NEC supercomputer would have been the first Japanese machine sold to a Federal-financed institution in the United States.
On Monday, the two companies continued to quarrel over the cost of the Japanese machine. Cray also made more data it had provided to the Commerce Department public. It estimated that NEC would receive $14.9 million from a $35.2 million five-year contract. The rest of the money would go to other companies working in partnership with NEC.
Cray estimated that NEC's total costs would be $80 million, of which $51.2 million would be for research and development.
Cray officials also said Monday that NEC had privately sold an SX-4 supercomputer in the United States for $5 million that had only 6 processors, compared with the machine that it planned to offer to the center, which had 128 processors at a hardware cost of $15 million.
But Adams disputed this, saying that his company was leasing the machine and contending that Cray was trying to make an unfair comparison between supercomputers that used a special high- performance processor technology called ECL and a less expensive technology called CMOS.
"They're mixing ECL apples, with CMOS oranges," he said.
In addition to the NEC case to be heard by the Court of International Trade on April 7, the Commerce Department must issue a final decision in Cray's dumping complaint, and the International Trade Commission is to determine whether Cray has been financially injured by dumping practices of the Japanese computer makers.
Copyright 1997 The New York Times Company