U.S. Supercomputer Maker Wins Anti-Dumping Ruling
Cray Research, the only U.S. supercomputer maker, emerged victorious Friday when the U.S. International Trade Commission upheld a dumping complaint and triggered the imposition of tariffs as high as 454% on Japanese supercomputers, effectively pricing them out of the market.
The financial impact of the decision will be limited, as just a handful of Japanese supercomputers are in operation in this country. But scientists argued that the ruling compromises their competitiveness by limiting their ability to buy the most powerful computers on the market. It also adds to a growing list of sore points in U.S.-Japan trade.
The dispute arose when the National Science Foundation decided last year to buy an NEC supercomputer for atmospheric research. It was the first time the Japanese had defeated Cray in a competition for a major federal procurement, touching off immediate concern over U.S. competitiveness in the cutting-edge field of supercomputing.
Cray, now a subsidiary of Silicon Graphics Inc., argued that NEC had agreed to sell the supercomputing system at a $65-million loss, setting the stage for a bruising price war that threatened the U.S. firm’s survival.
“It will certainly have a negative impact on the health of the atmospheric sciences. It already has,” said William Buzbee, an official at the National Center for Atmospheric Research in Boulder, Colo., which tried to buy the NEC machine. “And eventually, that will be the case for other disciplines of science and engineering.”
The ITC upheld an earlier Department of Commerce ruling that the Japanese companies had sold their supercomputers in the United States at below fair market value. Commerce set the dumping penalties, which are collected by U.S. Customs, at 454% for NEC and 173% for Fujitsu.
Officials at Cray applauded the ruling, which gives them a virtual monopoly on the U.S. market for so-called vector supercomputers. NEC Corp. and Fujitsu Ltd. called it unfair and said they will appeal. Japanese critics claim the U.S. position is hypocritical and an example of thinly disguised protectionism.
After winning a bitter battle over market access in the late 1980s, the U.S. has sold more than a dozen supercomputers to Japanese government agencies. But the U.S. government has yet to purchase a Japanese supercomputer.
Minnesota-based Cray has 90% of the U.S. market for vector supercomputers, 40% of the Japanese market and 55% of the rest of the world.
“We believe that the closed U.S. government market and ‘buy American’ market practices could become a major factor in U.S.-Japan trade relations from now on,” said Michio Naruto, executive vice president of Fujitsu Ltd., the other major Japanese supercomputer maker.
The supercomputer flap is just one of several disputes, ranging from aviation to automobiles, putting a strain on the bilateral relationship. The unresolved disputes come as economic woes in Japan and Southeast Asia pressure that region to boost exports.
“When there is a slowdown in growth there are increased pressures for import protection on both sides of the Pacific,” warned Jeffrey Schott, a senior fellow at the Washington-based Institute of International Economics.
Spokesman Chris Shimizu in Tokyo said NEC will continue to provide spare parts and service to its six U.S. supercomputer customers and is considering establishing a supercomputing center in Canada so U.S. clients can buy time on its most sophisticated machines.
“We will take some measures to fight back on this issue,” he said. NEC and Fujitsu said they will appeal the dumping decision with the U.S. Court of International Trade in New York.
Cray’s success in the anti-dumping case will apparently not be replicated in the marketplace, however. The atmospheric agency--a longtime Cray customer and previously faithful user of its latest technology--has now decided to buy a different type of system.
Buzbee, director of the center’s scientific computing division, said Friday that as a result of the U.S. government’s ruling he will shift to a “highly parallel microprocessor system” instead of the vector supercomputer offered by Cray.
He said it will take about a year to make the transition, but he is “cautiously optimistic” that what is known as a massively parallel computer system will give his agency the same firepower as its international colleagues.
But Buzbee said the ITC has put U.S. scientific competitiveness at risk by effectively pricing the Japanese out of this market.
“Politically you can’t afford [to buy a Japanese machine], and financially you can’t afford it,” he said. “This just assures that Cray will continue to be the only viable provider of vector supercomputers.”
A senior Cray official expressed surprise Friday that NCAR was switching its computing loyalties. But he noted that Cray might still have a shot at NCAR’s business, since the Minnesota firm also produces a massively parallel computing system.
“Some go one way and some go another,” said Earl Joseph, Cray’s director of competitive analysis. “We would be disappointed [with the NCAR decision] in the sense that we are always disappointed when a customer changes their mind.”
Meanwhile, Cray faces a competitive battle elsewhere in the world, as the Japanese computer firms are expected to step up sales in Asia, Europe and Latin America. Joseph said the pressure is already being felt.
“We’ve seen extreme dumping by Japanese vendors for well over a year,” he said. “They’ve been winning quite a bit of business by their aggressiveness.”
Several other sticky U.S.-Japan issues remain unresolved, notably an effort to fashion a bilateral agreement to cover passenger and cargo air routes. Negotiations ended this week without success, but U.S. and Japanese officials agreed to resume their talks in Washington in mid-October.
