Cray alleges dumping following $35M award to NEC

Cray Research Inc. last week accused Japan's NEC Corp. of dumping supercomputers in the United States as a result of its winning a five-year, $35 million deal to supply the high-end machines to the National Center for Atmospheric Research.

Cray asked that both the Commerce Department and the International Trade Commission examine the contract, which Cray claims will produce a $65 million loss for NEC.

Federal Computing Corp. (FCC) , Falls Church, Va., beat out Cray and Fujitsu to land the deal, under which it will lease four 32-processor NEC SX-4 supercomputers to NCAR, one to be installed in the first year, one in the second and two in the third.

As evidence of dumping, Cray pointed to the price of similar, 20-processor machines that NEC sold in Japan for $17 million to $23 million. Cray argues that NCAR essentially is getting four computers for the price of one. "When we say four for one, we aren't saying four NECs for the price of one Cray, we are using their own prices," said Earl Joseph, director of competitive analysis for Cray.

"The whole thing is a fabrication of numbers by Cray," said Sam Adams, vice president of sales and marketing for HNSX Supercomputers Inc., NEC's U.S. subsidiary in Boxborough, Mass. "There are several exaggerations, errors in methodology and false assumptions in the numbers Cray has put together that provide a seriously flawed analysis."

NEC is in business to make money, not lose it, Adams said. "It is not our strategy to sell below market price to gain market share," he added. "If we are not making a profit, pretty soon heads roll."

"It is smoke and mirrors," said George Blick, senior vice president of FCC. "We followed the federal procurement regulations to the letter, [and] we considered dumping [charges] foremost in our proposal." That was because Cray has complained about dumping on past bids, he said, and "every time the Japanese come close to winning something here in the U.S., somebody cries 'dumping.' "

Joseph, however, said he had used the most conservative approach to measuring publicly available information about the industry. He maintained that NEC is suffering losses under a plan to corner the world supercomputer market.

"I don't believe they have ever made any money in supercomputers," he said.

"I don't know if it is dumping, but it is one hell of a deal for NCAR," said Jeff Liebl, research analyst at The Smaby Group, Minneapolis. "It is safe to say that if NEC sold this machine for a profit, then they have created a spectacular new level of price performance in vector supercomputing."

That is exactly the case, said Blick, pointing to a price performance benchmark conducted by NASA's Ames Research Center that showed NEC's SX-4 supercomputer providing triple the price/performance of Cray's T90 system.

NCAR does not concern itself with procurement rules or international trade disputes, said Bob Serafin, director of NCAR. "What we do is science, and we are trying to get the best computer for the money," he said. "The [request for proposals] specified a certain amount of money and minimum performance, not maximum performance. This is not dumping, but we're not in a position to speak for the U.S. government."

If Commerce finds NEC guilty of dumping, it will refer the case to the ITC to determine whether Cray has been injured by the deal. If the ITC finds injury, Commerce will require NEC to pay a dumping penalty equal to the amount of the injury.