Duel for world computer market

Having humbled Detroit by winning a major chunk of the United States car business, Japan now is turning its planning and production guns on the US computer industry.

But industry observers here say the US has a much better chance of holding its own in computers than it did in cars. US data processing companies are aware of the challenge. They are outspending Japan on research and development and have key technical and cultural advantages.

Still the Japanese are likely to give US firms a run for their money, especially in certain types of components and small computers.

''We have the highest respect for their (Japanese) abilities,'' International Business Machines Corporation's president and chief executive officer, John R. Opel, said at the company's annual meeting. ''But they are not supermen . . . I am sure we will continue to meet their challenges wherever they choose to compete.''

That assessment is shared by more dispassionate observers. ''With (research and development) powerhouses such as IBM and Digital (Equipment Corporation) in the industry, it is not likely'' that the US computer sector will experience the same troubles as Detroit, says Ulric Weil, a vice-president with Morgan Stanley & Co.

It is clear the US industry will have to keep investing to maintain its position. The Japanese Ministry of International Trade and Industry (MITI) has set a target of winning 30 percent of the world data processing market -- and 18 percent of US business -- by 1990.

''Because the Japanese have a commitment to being a major factor in computers by 1990, they are targeting various sectors for attack. It is unlikely anything will be left out,'' says Larry Honig, measurement director at the Gartner Group, a computer industry market research firm in Stamford, Conn.

It was to gain technical intelligence for the attack that representatives of two Japanese computer firms -- Hitachi Ltd. and Mitsubishi Electric Corporation -- allegedly tried to steal computer secrets from IBM Corporation. Eighteen people were charged with these crimes last week.

One of the US industry's major advantages is its commitment to research. Last year, IBM alone spent $1.38 billion on research, and Digital Equipment spent $ 292 million. Japan's largest computer company, Fujitsu Ltd., had data processing sales of only $2.16 billion, according to a Quantum Science Corporation estimate. All other things being equal, the more a firm spends on research, the better its chance of staying ahead of the competition in a technical race.

Japanese computermakers also face cultural problems when they try to crack the US market. The software -- instructions that tell data processing equipment how to perform various tasks -- is tailored to national business customs.

The software gap will close over time.

''In the longer term they [the Japanese] will be able to handle software. But in the next five years it will be a real hurdle,'' Mr. Weil says.

Another major obstacle for Japanese firms is the commanding position in the US held by IBM and by equipment that will run on IBM operating instructions. In 1981, equipment IBM made -- or which can be plugged into IBM machines -- accounted for 79.1 percent of total large computer and associated equipment sales of $26.02 billion, the Gartner Group estimates.

So to crack the US market, most Japanese companies -- except NEC -- have chosen to make IBM compatible equipment, often in cooperation with US firms. For example, Fujitsu owns one-third of Amdahl Corporation, the largest maker of IBM plug-compatible equipment.

''That turns out to be a difficult game. They [IBM] are calling the tune you dance to and can change it without notice,'' says Frederic G. Withington, vice-president at Arthur D. Little & Co. The changes can take the form of price cuts or technical changes, either of which can place competitors from Japan or the US at a disadvantage.

Despite the challenges they face, the Japanese are attacking the world computer market with a well-developed strategy.

Penetration in the domestic computer market has been improved so that now Fujitsu outsells IBM in Japan. And to build volume and thus cut production costs , the Japanese have gone after markets close to home, such as Australia and less developed markets like Argentina. In the US, the Japanese have been especially successful targeting the market for subsystems and components.

For example, the Japanese firm Epson ''has done very well'' selling printers, says Donna Domenicali, a research consultant with Quantum Science.

And now Japanese firms are rolling out small computers for the US market. For example, Hitachi unveiled a personal computer at a recent trade show.

''And we believe they will come in with mainframes (large computers) much more strongly,'' says Quantum Science consultant Domenicali.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.