The US Commerce Department has upped the ante between US and Japan Inc, accusing Fujitsu and NEC of dumping and undercutting US supercomputing rivals.
NEC sold a $35 million supercomputer system to the National Center for Atmospheric Research (NCAR) in May last year, undercutting Silicon Graphics Inc?s Cray Research, which then filed an anti-dumping petition against its Japanese competitors and their low-cost four 32-processor SX-4 supercomputers.
Unsurprisingly, Cray welcomed the Department?s preliminary findings, and Robert Ewald, president of Cray Research, said: ?The findings confirm what we have contended since last July - that the four vector supercomputers offered to UCAR by NEC were illegally dumped."
He said: ?The role of petitioner in this antidumping dispute has never been comfortable for us... but we believe the long-term interests of users of high performance computers worldwide would have been severely compromised had we not protested the unfair practices of our competitors.?
NEC contended that legal process was flawed, since the Commerce Department released a pre-decision memo, analysing the bids using financial data supplied by Cray.
An NEC spokesman said that when Cray?s numbers were used by the Department, NEC felt it had no chance of a fair hearing. Instead, it filed a lawsuit in the US Court of International Trade, attempting to prevent the Commerce Department from pursuing Cray?s complaint.
Samuel Adams, NEC?s vice president sales and marketing, argued that months before the investigation was initiated, the Department released this analysis, effectively finding NEC guilty of dumping and attempting to get NEC out of the US supercomputer market.
He said: ?The Department of Commerce is not capable of judging the dumping allegations... in a fair and impartial manner.?
The Commerce Department?s preliminary ruling is the first stage in what could be a lengthy legal battle, and the US International Trade Commission is to perform an analysis of any injury to US industry caused by NEC?s action. The injury analysis is expected in June or July.
Cray?s Ewald said he wanted to get the litigation over with, but cautioned that there is more action pending. He said Cray welcomes a final resolution, but renewed activity suggest the company is gearing up to protect the declining vector supercomputer market and its shareholding.
Last week saw Cray publicise some of the data it provided to the Commerce Department. It claimed that NEC will receive around $15 million of the $35 million, with the remainder split up between development partners. The total costs of development, manufacturing and marketing are nearer $80 million, contended Cray, saying that over $50 million must have gone on research and development.
Cray also accused NEC of selling a six-processor SX-4 for $5 million elsewhere in the US, yet the weather lab?s system, with 128 processors, was only $15 million.
NEC retorted that the first machine was under lease not sale, and that Cray failed to account for the vast cost differential between previous and current technologies, ECL versus CMOS.
The cost of ECL and CMOS technology is key to the cost structure, said NEC, and Samuel Adams argued: ?The Department of Commerce?s determination... completely ignores advances in CMOS technology and competitive pricing levels worldwide.?
The findings against NEC are preliminary and subject to confirmation both by the Commerce Department and International Trade Commission. Industry commentators say NEC has damaged its case by refusing to provide financial data, and if the judgements against the Japanese companies are upheld, the financial penalties will be punitive, possibly four hundred times the cost of the $35 million system.
A trial is scheduled for April 7, and NEC?s Adams said: ?We expect to offer substantial evidence that Commerce has prejudged the dumping case and is not able to conduct a fair and impartial investigation.?
He reiterated that NEC denies the allegation of dumping, saying it is happy to have the matter examined independently.
The Commerce Department?s finding is timely, coming just as The US National Science Foundation announced it is cutting research funding of four supercomputer research centres down to two. Funding levels are unchanged, at around $170m each over five years, but the effect of closing two supercomputer centres, is seen by some commentators as a blow to US pride.
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