Computer Maker Cray Files Dumping Suit Against NEC
Cray Research Inc. stepped up its battle to keep a lock on the U.S. supercomputer market by filing a complaint of dumping Monday against a Japanese competitor.
Eagan, Minn.-based Cray accused NEC Corp. of winning a contract with a federal climate laboratory last spring by offering four supercomputers for the price of one. NEC denies the allegation.
“This is very serious to us. This is a very big deal to us,” said Robert Ewald, Cray’s president and chief operating officer.
The complaint, filed with the Commerce Department, is aimed at forcing the National Center for Atmospheric Research in Boulder, Colo., to scrap its deal with NEC.
The department, which has already expressed concerns about the deal, could impose stiff tariffs on the supercomputers if the price is deemed to violate U.S. anti-dumping laws.
The deal would give the Japanese an important inroad into the U.S. market and introduce their equipment to American scientists, analysts say. Cray controls 60% of the world supercomputing market.
The NCAR, which currently uses Cray equipment, solicited bids on a new supercomputer system at a fixed price of $35 million.
The dispute centers on how much the computers’ development costs should be factored into the price of the equipment. Cray Research says that based on its calculations of those costs, NEC would lose $65 million on the federal contract.
“The dumping charge is groundless,” NEC spokesman Samuel Adams said. “It is our view that Cray concluded it could not win this procurement on merit, so it tried to dictate the outcome through a campaign of political pressure.”
He said Cray overestimated NEC’s research and development costs and underestimated its revenue from the deal.
On another front, congressional allies of Cray have been pushing House-passed legislation that would bar the lab from obtaining the NEC computers if they are found to be priced unfairly.
The Defense Department, which uses Cray computers, is said to be concerned about the Colorado deal because it wants Cray to remain viable.
A private consulting firm that analyzed the NEC offer concluded that it was fair, according to NCAR officials. Cray calculated that the supercomputers would cost NEC $80 million and earn the company only $15 million. Cray put the research and development costs at $51.2 million.
According to NEC, its research and development costs are more than 10 times lower than Cray estimated. NEC says it will earn nearly twice as much from the deal as Cray claims.
The NCAR uses supercomputers for complex climate simulations.
The Commerce Department has 20 days to decide whether to investigate the complaint.
