| Japanese PC Server Market Sees Steady Growth
June 8, 1998 (TOKYO) -- The PC server market is growing steadily in Japan,
with total product shipments in 1997 rising nearly 40 percent year over year.
|Manufacturers and research companies forecast that the growth rate in 1998
will be 20-30 percent, thus intensifying the business competition for a larger
market share. Major manufacturers are going to differentiate their products
with their own multiprocessor technology.
Market Growth in 1998: Up 20-30 Percent
According to a survey by IDC Japan Ltd., the total number of domestic PC
server shipments between January and December 1997 was 177,900 units, and
total sales were 158.9 billion yen (US$1.15 billion). The number of units
shipped was up 40.4 percent year over year, and sales volume was up 38
percent year over year. IDC Japan forecasts that total shipments in 1998 will
be up 23.7 percent to reach some 220,000 units. PC server makers also
estimate a growth rate of 20 to 30 percent.
NEC Corp. held the largest share of 23.4 percent in units shipped in 1997
according to a survey conducted by IDC Japan, followed by four companies:
Fujitsu Ltd., 13.5 percent, IBM Japan Ltd., 13.5 percent, Compaq Computer
KK of Japan, 12.4 percent, and Hitachi Ltd., 10.2 percent.
Each maker is competing to achieve their own high
sales goals, being well aware that losing the PC server market will lead to
losing the desktop PC market for business use (See table
Major Suppliers: Support Level is Key to Winning
As for companies with large shares such as NEC, Fujitsu, IBM Japan and
Hitachi, strong support reinforced by substantial sales staff and system
engineers is an engine to promote their sales.
Fujitsu is determined to be a winner by committing the dominant number of
sales stuff and SEs and gain the highest share in two years by mobilizing some
20,000 SEs, the largest number among domestic competitors, said Minoru
Kanda, manager of the system sales promotion division.
Shiro Fujimoto, marketing management manager of IBM Japan's PS Brand
Strategy, said IBM Japan aims to double its share on a unit volume basis by
tying its dominant legacy systems to its main strategy."
While coping with those challenges, NEC as the top shareholder is still
formidable, commanding major dealers and agents and holding tight sales
channels to small- and middle-sized enterprises.
"Although Fujitsu is overwhelming NEC in terms of the number of SEs and
support staff members, NEC can still be a strong rival to Fujitsu by mobilizing
SEs and support personnel from cooperative dealers and system integrators. It
is not simply the number of a staff in our company that counts. The important
thing is the level of support for dealers," said Hisanori Yamauchi, Express
Server Business manager at NEC.
Compaq Computer Sees Share Decline, Does Business Merger for Leverage
Compaq Computer of Japan cannot be neglected as it occupied the largest
domestic share until three years ago. However, nowadays the market isn't
expecting much from Compaq Japan. Since the share of Compaq has continued
to fall, Hewlett-Packard Japan Ltd. and Dell Computer Corp. of Japan recently
declared that their target is to replace Compaq machines, making clear their
challenge to oust Compaq Japan from its high market position.
The primary reason for Compaq Japan's share fall lies in its sales channel. The
company to date has had only indirect sales channels through dealers and a
weak system for sales and supporting activity, experts say. Compaq Japan
admitted its weak point. "Indirect sales cannot give us correct and real figures
of users. It does not help us comprehend the state of usage by users," said
Masao Morimoto, manager of Compaq Japan's Enterprise Computing Division.
There is a possibility that this weakness can be conquered by Compaq's merger
with Tandem Computers Japan Ltd. in January 1998 and another planned
merging with Digital Equipment Corp. Japan in the future.
Compaq Japan has already decided to get orders for a project by using
Tandem's existing direct sales force and introduce systems in cooperation with
dealers and SI companies. However, PC servers will be shipped through dealers,
for it will cause unnecessary duplication of business practices between Compaq
Japan and current agents and SI companies if Compaq sells servers directly to
In this context, Hajime Takayanagi, president of Compaq Computer of Japan,
said his firm is dealing with a big project for user Super Parallel Server
Himalaya, which plans to purchase PC servers valued at several hundred
million yen (US$2-3 million).
There also are emerging entrants to the server market. They are
manufacturers such as Dell Computer of Japan and Gateway 2000 Japan Inc.
that have been growing by mail-order sales of systems. They do not offer the
intimate support usually offered by major makers, but the new entrants will
compete with quick delivery of inexpensive PC servers.
Dell Computer started to ship PC servers on May 18 with a strategy to actively
sell them to existing PC clients. Dell has a strong reputation among work
groups in large-scale enterprises as well as small- and middle-sized enterprises,
and it anticipates sales to these potential clients.
Differentiating Products by Multiprocessors
The function and quality of a PC server are important for gaining a reasonable
share in the PC server market.
However, it is not easy to provide a PC server whose selling point is
functionality. Disk arrays can functionally differentiate products, but they still
fall short in their appeal to clients choosing a PC server.
What dominant PC server manufacturers consider an area of concentration for
differentiating their products is a machine compatible with multiprocessors for
As long as a server is built using chip sets provided by Intel Corp., it can
currently mount at most four Pentium Pro or two Pentium II processors.
Therefore, makers are developing a multiprocessor machine with breakthrough
functions that go beyond that restriction so that they can demonstrate their
level of technology and gain confidence from clients.
NEC now has a PC server that can mount up to eight Pentium Pro processors,
while Fujitsu developed a PC server with up to six Pentium Pro processors.
NEC adopted a chip set called AQUA that is an original design. Fujitsu is using
the so-called Champion chip set developed by Reliance Computer Corp. of the
United States, a subsidiary of Fujitsu.
Both companies also revealed plans to develop a new type of PC server with a
Pentium II Xeon, Intel's new processor that performs at 400MHz to 450MHz.
The number of Pentium II Xeons to be mounted on NEC's server is reportedly
16, and that on Fujitsu's server is 16 to 32.
In the U.S. market, Hewlett-Packard Co. succeeded in developing and
manufacturing a PC server which can mount a maximum of eight Pentium Pro
processors using a chip set from Axil Computer Inc. of the United States.
However, HP has not provided this product in Japan.
Table: Sales targets of major PC server manufacturers/ vendors
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