Ethics in Business: Big Brother

Supercomputers are the fastest computers, which are used mainly by scientists. A supercomputer can cost upward of $30 million. Cray Research Inc. is the undisputed leader in this market segment, and it has 67 percent of the world market. Fujitsu Ltd., in second place, holds 20 percent. The third-place NEC Corp. has 6 percent.

In 1987, the Massachusetts Institute of Technology (M.I.T.) planned to buy or rent a supercomputer and solicited bids former $7.5 million contract. Among those submitting proposals were Cray Research, IBM, E.T.A. System, Amdahl (46 percent owned by Fujitsu), and Honeywell-NEC (SO percent-owned b} Nippon Electric Corp.).Learning of M.I.T.'s preference for Japanese-made machines, the U.S. government intervened. The acting Secretary of Commerce formally informed M.I.T.'s president that "imported products may be subject to U.s. antidumping duty proceedings informally, despite a denial of the Commerce Department of the government's threat, it was made clear to M.I.T. that, in light of Japan's barriers preventing U.S. supercomputer firms from entering the Japanese market, it would not be in the interest of the United States to purchase Japanese units. M.I.T reacted to the U.S. government's intervention by canceling its procurement and announcing that it planned to apply for federal funds for a research center- that would use 'several U.S.-made supercomputers.

The 1990 supercomputer trade accord has helped Cray Research to increase its market share in commercial installation is in Japan to 25 percent. However, Cray Research has been unable to further penetrate the public sector, and its market share-in this sector remains at 8per cent. The public sector includes government funded universities and research labs. Al-though Japanese firms have long been Cray's customers. The Japanese government (Japan's 'biggest buyer) has never bought from Cray. As an example of how difficult it is to penetrate Japan's public sector, the National Institute for Fusion Research chose to lease NEC's SX-3 system for $625,000 a month. However, according to four pages of benchmark test results, Cray's C90 system surpassed all but one of the Fusion Institute's speed requirements. Still Japanese officials insisted that the extra power available from Cray's machine was irrelevant since the fusion scientists did not need it. Furthermore, they pointed out that the bid required the machine to work with specialized storage devices. Cray, on the other hand, argued that the requirement in question was bogus since it was included solely to favor NEC's machine.

Washington, while accusing Japan of being unfair, has done exactly the same thing. The U.S. government has done its best to discourage sales of Japanese supercomputers in the United State. U.S. government labs, the biggest supercomputer users in the world, have not yet bought a Japanese machine. Whenever an American university or government agency ha5 expressed an interest in buying a Japanese unit, Cray has quietly but effectively lobbied to block the move. In 1991, due to political pressure, Fujitsu was prevented from donating a $17 million supercomputer to a Colorado consortium of environmental scientists. Congressional critics did not like the idea of a Japanese giveaway. They did not object, however, when Cray donated in the same year an X-MP system to the Energy Department in support of a national high-school supercomputer program.


1. Is it appropriate for the U.S. government to pressure M.I.T. to reject Japanese supercomputers in spite of lower prices? Note that the M. I.T. research projects that would use the supercomputers were federally funded.

2. Did M.I.T. react properly in canceling its procurement plan?

3 . Is it appropriate for the United States to try to close off its supercomputer market to Japan while, at the same time, trying to pressure the Japanese government to purchase American supercomputers?