Commerce Department takes U.S. supercomputer executives to Japan

Commerce Department Takes U.S. Supercomputer Executives to Japan The Commerce Department led executives from 13 supercomputer and minisupercomputer firms on an Executive Trade Mission to Japan late last year. The mission brought together top American scientific and engineering computing systems manufacturers and service companies, including Alliant Computer Corporation, Cray Research, Control Data Corporation/ETA Systems, Digital Equipment Corporation, Electronic Associates, Inc., ELXSI, Floating Point Systems, IBM World Trade Asia Corporation, Minnesota Supercomputer Center, NCUBE, Numerical Algorithms Group, Sequent Systems, Inc., and UNISYS Corporation.

Mission Itinerary and Objectives

Prior to departure for Japan in October, the mission members participated in a Washington-based program designed to give them background on both U.S. Government activities in high-tech trade with Japan and the Japanese market itself. The business executives received intensive briefings from Commerce, State, the Office of the U.S. Trade Representative, and White House officials, met with key Congressional leaders, and were formally sent off at a Capitol Hill reception attended by trade policy experts, industry representatives, and press.

During a week-long visit to Tokyo and Osaka, the 19 mission members, led by Deputy Assistant Secretary for Trade Development Joan M. McEntee, met with high-level Japanese Government leaders and potential customers. The mission also held supercomputer seminars in which each company described its products and capabilities to targeted Japanese audiences of managers, engineers, distributors, and researchers. Included were such manufacturers as Honda, Mitsubishi Heavy Industries, and Nippon Steel, as well as trading company representatives such as Matsushita Electric Industrial Company, Ltd. Each seminar was followed by a reception, hosted by the U.S. Embassy in Tokyo and the Consulate in Osaka, which provided additional opportunities for informal business introductions and discussions. The day-long seminars were followed by a day of individual business meetings for each company in each city, arranged by the U.S. & Foreign Commercial Service. The companies participating reported that the mission was very successful in helping them to develop new contacts, to enhance their long-term market exposure in Japan, and to generate high-level interest among targeted end-users.

As an example, according to Robert G. Finney, President of Electronic Associates, Inc. (EAI), the major direct benefit of the trip was that it "opened doors at higher levels of Japanese industry and government." EAI produces the Simstar computer, a hybrid analog and digital computing system, which has a median sales price of $1.2 million and starts at $500,000. People at line management level in Japan "have wanted our computers, but have not been able to get approval from higher levels," said Finney. The mission "may pry the doors open. We laid the groundwork for orders next year that we would not have gotten otherwise." EAI has since reported that as a direct result of the mission it is about to conclude two contracts in Japan which are conservatively estimated to bring in $2 million in sales in 1988 for the New Jersey-based company. Other participants are currently following up on sales leads developed during the mission.

The Supercomputer Agreement with Japan

The U.S. Executive Supercomputer Mission to Japan was timed to follow the August 1987 U.S./Japan supercomputer arrangement on Japanese Government supercomputer procurement. The arrangement came about as a result of intensive negotiations between the U.S. and Japanese Governments on U.S. companies' lack of market access to the Japanese public sector and university markets. The arrangement established procedures designed to eliminate the bias in Japan's procurement process that had excluded U.S. firms. According to the U.S. Trade Representative, Clayton Yeutter, "these new procedures should give American exporters increased opportunities to sell supercomputers to the Government of Japan, a market that has been supplied solely by Japanese producers in the past even though American supercomputers are the best in the world." The new procurement procedures entitle American supercomputer suppliers to be involved in the earliest stages of procurement planning, when important decisions, such as setting the criteria for the final selection, are made. They also establish a new discussion phase in the procurement process that will provide all potential bidders with an opportunity to demonstrate the merits of their product to the Japanese Government. In addition to prohibiting discrimination against U.S. products, these new procedures establish significantly longer time periods in which companies can prepare bids that are responsive to the requirements of the procuring entity; make it more difficult to use single-tendering or sole-sourcing; provide for the release of more information on contract awards; and establish complaint and protest procedures that may be initiated by the company itself.

A few weeks before the Executive Trade Mission arrived in Japan, the Japanese Government announced the purchase of a U.S. supercomputer from each of two mission participants: Cray Research and ETA Systems, a wholly-owned subsidiary of Control Data Corporation. Japan's Ministry of International Trade and Industry (MITI) purchased a Cray XMP system for use by MITI's Agency of Industrial Science and Technology, which plans to install the Cray supercomputer at its Tsukuba research laboratory. ETA Systems sold an ETA 10 supercomputer system to the Tokyo Institute of Technology. Both supercomputers were special purchases under Former Prime Minister Nakasone's $1 billion Emergency Import Program.

During the week following the trade mission's visit, two Japanese universities--Tohoku and Hokkaido--also announced supercomputer procurements. These two procurements were the first announced under the new procedures established as a result of the U.S./Japanese arrangement on market access.

The Supercomputer Market

Supercomputers are generally defined as the fastest computing systems available. Through 1987, the number of supercomputers in use worldwide reached over 300 units, with a total value of more than $3 billion. Demand for these systems in the industrial sector has rapidly expanded during the past few years to match the number of systems installed in the government sector.

In addition to supercomputers, a new class of high performance computing systems has been developed, called "minisupercomputers" or "near-supercomputers." These systems bridge the gap between the powerful and expensive supercomputers and the less powerful superminicomputer. These systems are used primarily for scientific, engineering, or other complex computational tasks. They provide approximately 25 to 35 percent of a supercomputer's performance but at a small fraction of the cost. For example, the average price of a minisupercomputer system is about $750,000, as compared to the $12 million average price of a supercomputer.

The United States is the largest supercomputer market in the world, representing approximately half of the installed base, or about 140 units. Japan is the second largest market, with more than 50 units installed. U.S. manufacturers have produced roughly 80 percent of the supercomputers in use throughout the world, while Japanese suppliers account for the remainder. Suppliers of high-end scientific and engineering computers have a promising future ahead. The investment firm of Hambrecht and Quist forecasts a 31 percent annual growth rate for this market through 1990 and expects world demand to exceed $3 billion annually.

The Future with Japan in Supercomputers

Both the U.S. and Japanese Governments took an important step toward addressing the market access issue when they concluded the supercomputer arrangement last August. The arrangement resulted from negotiations on Japanese supercomputer procurement practices that were based on intensive U.S./Japanese trade and market analyses. In light of the increased opportunities provided by the new Japanese Government supercomputer procurement procedures, the Commerce Department took the initiative to organize the October Supercomputer Trade Mission. The U.S. Government and the U.S. computer industry showed their joint commitment to the Japanese market through their combined efforts in the October 1987 mission to increase U.S. supercomputer and minisupercomputer companies' market exposure and to follow aggressively sales leads. The Commerce Department's Office of Computers and Business Equipment is currently planning a second Supercomputer Mission to Japan for April 1988. This upcoming mission will conduct a week of supercomputer seminars, with each day focusing on a different end-user group.

The Commerce Department estimates that Japanese supercomputer sales alone could reach $600 million by the end of this decade. Japan's Ministry of International Trade and Industry predicts that the installed base of supercomputers, including minisupercomputers, will total 400 units by 1991. Japanese demand for the kind of advanced computers manufactured by the U.S. companies represented on the October supercomputer trade mission to Japan would average about 70 systems annually. As one high-level Japanese Government official urged when meeting with the U.S. business leaders on the mission, "let the cash registers ring!"

COPYRIGHT 1988 U.S. Government Printing Office
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