The Reagan administration is considering a possible trade complaint against Nippon Electric Corp. for a low-cost lease of a supercomputer to a group of Houston universities that was made so the Japanese product could gain a toehold in the United States, administration trade officials said yesterday.
The administration's trade "strike force" is studying the case to see whether President Reagan should accuse NEC of using unfair trade tactics with its campaign to undercut the bids of American companies to sell a supercomputer to the Houston Area Research Center (HARC), a consortium of four Texas universities.
The "strike force" was set up by President Reagan last fall to ferret out unfair trade cases that the president would initiate himself to throw the full weight of the government behind the complaint.
The investigation also involves allegations of a conflict of interest by Olin C. Johnson, head of the Houston consortium's committee that agreed to lease an NEC supercomputer instead of following its original plan of buying an American model. As recently as May, 1984, Johnson listed himself as a consultant to NEC.
Johnson could not be reached for comment. But Jane Armstrong, HARC's deputy director, brushed aside the conflict of interest allegations, saying Johnson had "professional involvements with many of the companies" bidding for the HARC contract. She added she was unsure whether he received income from any of them besides NEC.
"We have not purchased a computer," she said. "We have entered into a research relationship with NEC. As part of that relationship we have acquired a supercomputer. It is a lease arrangement, and the details of that lease arrangement are confidental as part of the contract."
Samuel Adams, marketing vice president for NEC's U.S. unit, called the details of the lease "proprietary" information between two business groups that generally is not made public. He also said that Johnson is not now a consultant to NEC, but had served as one in 1982.
A supercomputer can process highly complex data thousands of times faster than the largest business computer, and is used for activities that range from cartoon animations to the design of weapons, nuclear bombs, cars and airplanes.
The NEC arrangement with HARC raised concerns among the American companies, including Cray Research Corp. and Control Data Corp., who were trying to sell their supercomputer to the Houston consortium. They have been reluctant, however, to file a trade complaint themselves because they are concerned about annoying a potential customer, industry sources said.
The four institutions that comprise HARC are Rice University, which is private, and three state institutions -- the University of Texas at Austin, the University of Houston and Texas A&M.
The issue being studied by the strike force is whether the lease arrangement amounts to an unfair trade tactic known as dumping, which is a sale below the cost of production.
The strike force will recommend to Reagan whether he should initiate an unfair trade complaint against NEC or not.
The case is potentially the most complex and controversial of the five initiated by Reagan over the past four months. It involves the frontiers of computer technology, where the United States still maintains a lead against strong Japanese competition, and attempts to include discount leases and the subdidized rentals of computer time as an unfair trade tactic.
In a telephone interview, Duane Pyle, a University of Houston computer scientist, questioned the results of a test conducted by Johnson and a graduate student on the qualifications of the NEC computer. Although Johnson refused to allow other computer scientists to take notes on his reports of the benchmark tests, Pyle said they appeared to show the NEC SX2 supercomputer was not as powerful as ones made by either Cray or Control Data.
The concerns of U.S. trade officials were raised last fall, when HARC suddenly shifted from the purchase of an American-made supercomputer to its arrangement with NEC. Deputy U.S. Trade Representative Michael Smith brought it up as a possible point of friction in talks he held in Tokyo with his Japanese counterparts.
According to industry sources, Cray and other companies were invited last summer to submit bids for a sale of a supercomputer to HARC after qualifying in a benchmark test that NEC had not asked to take part in.
While no decision was made, early in the fall HARC began talking to Cray about financing the purchase through industry improvement bonds that would include a buyback guarantee by the Minneapolis computer firm, whose products cost between $5 million and $17.6 million. Suddenly, sources said, HARC broke off the discussions with Cray and NEC quickly entered the picture. The contract between HARC and NEC was signed Jan. 13.