TOKYO — AT the popular Laox store in Tokyo's electronics district, a new Compaq desktop personal computer for sale at $1,040 is drawing an unusually large crowd. The Japanese shoppers appear to be in state of reverse sticker-shock.
"These PCs came out in October and already we don't have enough stock to meet demand," says Laox salesman Masahiko Kondo.
Also reeling is Japan's computer giant, NEC Corporation, which commands over half thecountry's PC market but whose price for a comparable PC is almost double that of the new Compaq. In an unusual move for a Japanese company, NEC president Tadahiro Sekimoto has begun to publicly criticize the new Compaq products.
After revamping itself last year to retain its reputation as a top maker of IBM-clone PCs, Compaq Computer Corporation has become the latest United States company to invade Japan's computer turf.
In both hardware and software, US firms such as Apple, AST Research Inc., and Microsoft are making frontal assaults on a PC market still far from saturated.
IBM Japan, which remains a minority player with 6.9 share of the PC market, launched new low-priced models in Japan just two weeks after Compaq's move. Market leader pressured
"This is an area where Japanese thought they were safe from much foreign competition," says Peter Wolff, a Kidder, Peabody & Co. analyst in Tokyo. "Japan always thought it had the best computer technology," he says. "But they can't brag about it anymore."
In one respect, Compaq's pricing blitzkrieg in the Japanese market is merely an export of the PC price wars going on in the US. But it is also a rare example of an American company beating the Japanese at their own game using clever miniaturization of computer chips and control of manufacturing costs.
"Japanese companies have traditionally seen the world as a single market," says Masaru Murai, president of Compaq KK, the company's unit in Japan. "But for some reason, they treated PCs as a market only in Japan. Now we're telling them that PCs are a world market."
Mr. Murai, a former executive at IBM Japan, says that Japan's Ministry of International Trade and Industry, which protected the domestic computer industry for decades, has shown a strong interest in how Compaq was able to reduce its costs.
He says NEC and other Japanese computermakers would find it risky to drop PC prices. "In the US, PCs have become a niche market. But the Japanese firms make a range of computer products from mainframes on down. A low-price PC would cannibalize their other products. Do they really want to do that?"
Only about 12 percent of households in Japan have PCs, and about 5 percent of small businesses, offering an opportunity for foreign firms to grab share as the market grows.
NEC estimates the PC market will increase sixfold within a few years.
But "NEC's market share will shrink because its clients will move to lower-price computers," says Junichi Kimura, industry analyst of Dresdner-ADB Securities. "And its computer earnings will be cut to zero in the coming two years." Entry of powerful software
In addition to Compaq's price challenge, the US computermakers in Japan predict that the introduction of Intel's 386 and 486 microprocessors along with Microsoft's DOS V and Windows software, will give a boost to IBM-compatibles because these advances allow PCs to quickly manipulate the difficult characters of the Japanese language.
"The new software will more easily travel across any kind of hardware and that will hurt NEC," Mr. Wolff says.
NEC has kept its domination of the Japanese computer market by keeping customers hooked on its exclusive operating system. As a result, IBMs and compatibles command only about 20 percent of the PC market. Apple has gained 5 percent of the PC market in just a few years. Japan discounts challenge
NEC vice president Yoshi Takayama, in countering Compaq's challenge, said any price war will occur mainly among IBM-compatible makers and not affect NEC.
Mr. Takayama says many software houses will not write programs for Compaq or the new DOS V environment.
The available number of software programs in Japanese for NEC models is about 14,500 compared to about 1,000 for Microsoft DOS V, says Chris Shimizu, NEC spokesman.
NEC also has about 7,000 retail outlets, compared to a few hundred for Compaq and other IBM-compatible PC firms.
And in a trait found only in the Japanese market, NEC offers training to first-time users. NEC also offers extensive after-sale service to customers, which the foreign firms are trying to match.
"We're not trying to match the price yet. We prefer to improve performance," Mr. Shimizu says.
Compaq's Murai says Japanese trading and software houses which once catered to NEC, are quickly moving into the IBM-compatible camp. He says that the "internationalization" of Japan's PC market by foreign competitors will bring about a revolution among Japanese companies.