The Computer Year 1995:
A Retrospective
From the rapid growth of the Internet to the expansion of the home PC
market, from the increasing popularity of multimedia to the release of Windows
95 -- 1995 was an event-filled year. There were too many major, diverse
happenings in the Japanese computer market in 1995 to characterize the past
12 months in one catchy phrase, so we won't even try.
by John Boyd
AD 1995 (Heisei 7, by the Japanese calendar):
ç It was the year in which PCs belatedly made it as a mass market
item in Japan, with vendors reporting hefty shipment increases over the
previous 12 months -- especially to home users.
ç It was the year when DOS/V PC manufacturers consolidated sales
and proved to everyone's satisfaction -- except recalcitrant market leader
NEC Corporation, perhaps -- that their efforts to establish a Japanese computer
industry standard was no flash in the silicon pan (as were previous attempts,
such as the AX standard). DOS/V vendors, as a combined force, have now developed
the muscle to challenge the market hegemony that NEC has so industriously
built up for itself over the past decade.
ç It was a year whose biggest software deal, IBM's $3.5 billion buyout
of Lotus Development (and, importantly, its famed Lotus Notes groupware),
received just a fraction of the press coverage devoted to a single new product
release. The major event of the year (if not of the decade), both worldwide
and in Japan, was Microsoft's release of the long-anticipated, long-delayed
Windows 95 operating system. In some respects, the past ten years have been
a history of Microsoft working to catch up with the Mac; it has now succeeded,
with a vengeance that threatens Apple's independent existence. Though not
due for launch in Japan until November 23, 1995 (a few days after the deadline
for this article), the Japanese language version of Windows 95 has still
managed to create some early black magic, following the August worldwide
roll-out of the English-language Windows 95. Under the Windows spell, PC
buyers across the nation began to delay their purchases until the big day
arrived in Japan.
ç And, 1995 was the year that multimedia and telecommunications functions
became standard on most PCs shipped, thanks to the surging popularity of
CD-ROM software and the Internet. Overall, falling PC prices, easier-to-use
software, enticing multimedia titles, and Internet hype -- not to mention
the additional bonus of an industry open standard finally taken root --
all these combined to grab the attention of once-indifferent Japanese consumers.
As a result, 1995 PC sales skyrocketed. What had been an uncommonly fractured
market of plug-and-play wapuro (word processors), cheap game machines,
and a variety of outrageously priced, proprietary impersonal computers at
last grew to a mature, personal computer market in 1995.
The PC sonic sales boom
The loudness of the PC boom in Japan surprised almost everyone. Even normally
astute market researchers IDC Japan and Dataquest Japan were sent scrambling
to switch their calculators back on and sharply revise upwards their projections
of 1995 PC shipments. IDC Japan, for instance, had forecast in March that
the industry would ship 4.4 million units, a hefty 30% increase over 1994's
3.4 million units. Just six months later, however, IDC jacked those figures
up to 5.5 million units to be shipped -- a big, fat 63% increase. The cause
was, in part, an unforeseen buying binge by home users.
Curiously, although Japanese consumers are supposedly PC novices, their
tastes are nevertheless highly refined. They are especially being drawn
to machines served up as an attractive single-unit: boxes crammed with such
features as built-in CD-ROM drive, digital (or surround) sound, and a modem
-- not to mention the pre-installed software to make full use of those goodies.
What's more, the Intel Pentium processor quickly became the chip of choice
to power all this. And why not, with prices for such a ready-to-use package
in late 1995 dropping to as low as $1,500 in the US, and at last dipping
below ¥200,000 (about $2,000) in Japan? To pile further weight onto
the collapsing price structure in Japan, merchandise chainstore-colossus
Daiei Inc. announced in September that it would sell one of NEC's popular
Multi CanBe models (admittedly an "old" 486 DX2 version) for just
¥100,000 ($1,000), less than one-third of the manufacturer's "recommended"
price tag of just a few months ago. Once sold very near list price, in 1995
even NEC's new computer models were being discounted in Akihabara stores
by 30% to 40% almost from day one, and DOS/V manufacturers such as Dell
have dropped prices on their entire line-ups significantly more than once
during the year.
Consequently, among the four major market segments -- the power user, business,
home, and education markets -- it is the long-neglected home users that
are now grabbing the attention of PC vendors in Japan. Projected sales for
this segment will soar 80% in 1995, according to IDC Japan. So, almost overnight,
boxes that were once discernible from each other only by the vendor's logo
are now growing positively sexy in appearance, as designers vie to turn
on consumers with eye-appealing curves and attractive tones.
Competition hardens
The siren call of constantly ringing cash registers during 1995 wasn't lost
on the ears of Japanese electronics consumer manufacturers. They all joined
the rush to gate-crash the PC party going on in the Japanese home, bringing
with them their tricks of the trade.
Pioneer Electronics, for example -- known largely for its laser disc players,
karaoke systems, and stereo equipment -- became the first Japanese
company to license Apple Computer's Mac OS (operating system) and ship a
Macintosh clone. Pioneer used its stereo and video know-how to equip two
Macintosh clones with 3D speakers and add-in cards for video capture and
editing functions. Fellow stereo manufacturer Aiwa, meanwhile, tried to
perform a similar trick for the DOS/V platform, jazzing it up with superior
sound capability.
But it was Matsushita Electric, the world's largest consumer manufacturer,
that appropriately out-featured everyone else by upgrading its Woody PC
-- a multimedia computer already packed with features -- to include a TV
tuner and easy video editing capability. And in an adventurous piece of
one-upmanship (for a company more noted for its wait-and-see marketing),
Matsushita replaced the Woody's CD-ROM with its new Power Disk drive.
The PD drive -- also available as an external unit for Windows and Macintosh
computers -- is Matsushita's optical rewritable system that can store 650MB
of data on a removable disk. And as if that wasn't enough, the PD drive
does multiple duty; it is also a 4X CD-ROM drive and audio CD player, and
can read Video CD, Photo CD, and Electronic Book disks -- all from the same
caddy. But Matsushita's efforts with the Woody to peck its way into the
center stage of the PC arena doesn't stop there. The consumer electronics
giant was also the first to ship a nifty A4-sized notebook computer incorporating
a standard CD-ROM drive (basically, an upgraded version of its nonstandard
8-cm CD-ROM notebook that first appeared in 1993). But Matsushita soon faced
tough competition, as Toshiba and IBM Japan, followed by others, launched
their own similarly equipped multimedia notebook computers, while upping
the ante in either added features or price.
Such hot competition for an untested niche market underscores the reality
that Japanese manufacturers are now in a league of their own when it comes
to miniaturization and portable computing. Given that a migration from desktop-based
computing to mobile computing is inexorably underway, the Compaqs, Dells,
and Gateways -- who are already reliant on Japanese OEM companies for their
portable offerings -- should be viewing the future with trepidation.
And, speaking of Gateway, it finally set up shop on Japan shores in 1995,
belatedly joining rival US vendors like Dell, AST, Compaq, and IBM, not
to mention domestic manufacturers such as Fujitsu, Toshiba, and Hitachi.
All of these computer giants are actively exploiting the DOS/V industry
standard to wrest market share from NEC. The competitive pot that heated
up in 1995 should reach a boil in 1996.
The hard facts of the
software market
On the software side of the recipe, Microsoft budgeted an incredible $200
million for its worldwide marketing of Windows 95 -- more than the total
earnings of many of its supposed competitors. Yet the wisdom of such lavish
spending might be called into question. The pent-up demand and the adulative
press coverage for the long-delayed product had already guaranteed its success.
Such a barrage of hype can only lead to pumped-up expectations of ordinary
end-users that will inevitably be deflated, as in the cases of reported
disappointment over the anemic Microsoft Network online service. More than
that, the flaunting of such riches -- such as the crass millions paid to
the Rolling Stones for use of their "Start Me Up" music -- helps
fuel industry and consumer resentment of Microsoft's wealth and monopoly
power (while ensuring that Microsoft remains under the beady eye of the
US Justice Department for anticompetitive practices).
Still, from another perspective, if the industry has to have a monopolist,
surely better the shrewdness, drive, and perspicacity of Bill Gates and
his Microsofties than the lamentable lack of such from competitors? Some
were once much bigger or more powerful than Microsoft, but grew complacent,
smug, and lazy.
In Japan, PC manufacturers' preparations for the expected November 23 Windows
95 tsunami had long been underway -- and nowhere more so than at NEC. In
1994, NEC's market share slipped below 50% for the first time in a decade,
while the shares of DOS/V makers and Apple Japan both rose. NEC, then, simply
could not afford to be seen lagging behind competitors when it came to introducing
Windows 95.
NEC owes its long-dominant market share to a three-pillar strategy: its
proprietarized hardware and DOS version, the largest choice of Japanese
software, and entrenched marketing and support services covering the Japanese
archipelago. But since the 1993 release of Windows 3.1J -- which runs on
both NEC PC98 and DOS/V architectures, providing cross-platform compatibility
for Windows applications -- the first of these pillars has come crashing
down like a damaged hard disk. The second strategy, meanwhile, is now crumbling
as the Japanese computing world switches from DOS to Windows software.
NEC, then, faces a dilemma. Even while watching its proprietary advantage
disintegrate, NEC must work up a sweat maintaining its contrary architecture,
in order to maintain backward compatibility with the tens of thousands of
legacy 9801 applications in use. At the same time, though, NEC has to ensure
that its proprietary PCs run all the new Windows applications flooding the
market -- not to mention the new wave of 32-bit applications being released
to take advantage of Windows 95.
To make certain of the latter, NEC has long had a group of engineers stationed
in Redmond, Microsoft's headquarters near Seattle, working overtime on tweaking
and massaging Windows 95 to adapt it to NEC's proprietary system. The goal
was to have a PC98 version of Windows 95 available and running as bug-free
as the standard version for the DOS/V platform by the Japanese release date.
Yet, all PC vendors suffered a setback when the 90-day delay between the
launch of the English and Japanese versions of Windows 95 unexpectedly persuaded
many Japanese buyers to halt their mad dash to electronics centers like
Akihabara. Instead, potential buyers began to wait for PCs that would come
preloaded with the new operating system. This buying pause was painful enough
to prompt vendors to increase already significant price cuts and to offer
Windows 95 upgrades free to pre-November-23 buyers.
A three-player game
With all the Windows-shattering fanfare, and the DOS/V versus PC98 maneuvering,
it would be easy to conclude that Apple's Macintosh has been superannuated
to the Computer Hall of Virtual Fame (along with CP/M, TRON, and the Lisa).
Don't be too quick to count Apple out of the game, however. In fact, the
Mac continues to be more popular than ever (and even more popular in Japan
than in the US), with sales again up sharply in 1995. Apple Japan announced
that it shipped 752,000 units during its 1995 business year (ending September),
a big 45% increase over 1994, while recording its best-ever revenues of
¥185 billion.
But, as throughout its two-decade chaotically creative history, Apple remains
its own worst enemy. Plagued by a poor ability to estimate demand for new
models in recent years, Apple again failed to read the dollar signs, and
was punished with a reported $1 billion worldwide backlog in unfilled orders.
Apple Japan, too, continued to play its favorite game of executive revolving
doors. After only one year at the helm, Apple Japan president Seiji Sanda
said sayonara in 1995, following a disagreement on basic strategy
and reported conflicts with his direct boss, John Floisand (head of Asia
Pacific).
Sanda -- headhunted by Apple from Nippon Motorola in July 1994 -- had been
brought in when his predecessor, Shigechika Takeuchi (poached from Toshiba
a few years earlier) unexpectedly quit in 1993, following the resignation
of his mentor, Apple Computer chairman and CEO John Sculley.
A welcome boost
for UNIX
Meanwhile, the UNIX workstation market was experiencing its own major upheavals
in 1995, and some welcome successes. Just when it looked like UNIX vendors
were facing a certain slow slide into the abyss -- down a path greased by
Microsoft's other operating system, the industry-strength Windows NT --
along came the Internet boom.
The phenomenal interest in this global information network -- particularly
the graphical network monster known as the World Wide Web -- created a huge
new market for workstation servers to be used in connecting institutions
and corporations to the Net. Given that the Internet infrastructure has
been erected on UNIX-based languages, communications protocols, and hardware,
UNIX vendors like Sun Microsystems and Silicon Graphics have been ahead
of the game in feeding corporate hunger for connectivity.
Japan may have come late to the Internet, but it is catching up fast. Most
major IT (information technology) vendors now have home pages -- many in
English as well as Japanese -- providing corporate information and even
bilingual press releases. Some have gone a giant step further. Fujitsu,
for instance, publishes a weekly culture and entertainment magazine called
"teleparc" (teleparc.infoweb.or.jp.) in English and Japanese.
With so many businesses investing in Internet coffee shops and virtual stores,
such ideas are no longer a novelty.
Not only the Net, but online services in general have witnessed spectacular
growth. NIFTY-Serve now claims over a million users nationwide, and PC-VAN
is not far behind. A new service, Franky-on-Line, from Tokyo-based Future
Pirates Inc., is attracting PC newcomers by offering a state-of-the-art
Virtual Reality graphical world that's as easy to maneuver in as clicking
your mouse.
But back to the world of workstations.... Scores of UNIX vendors in Japan,
Europe, and the US did themselves a big favor when they agreed on a plan
to unify specifications for the next-generation 64-bit UNIX interface. Their
action was spurred on both by a need to eliminate numerous small-but-irritating
differences between their systems and by the growing success of Windows
NT.
Yet, no sooner was the announcement made than new events conspired to raise
doubts about the plan ever reaching fulfillment. Network OS king Novell
-- also jittery about inroads into its turf being made by NT -- ditched
its ownership of UNIX, selling its UnixWare OS and Unix SVR4.2 source code
to the Santa Cruz Operation (SCO), which has long dominated the Intel-based
UNIX market in the US and Japan. SCO will use its acquisitions to create
an upgraded, high-volume UNIX OS slated for 1997 release.
But the bombshells didn't stop there. Hewlett-Packard, SCO, and Novell jointly
announced that HP would work on a 64-bit rendition of UNIX that will combine
its HP-UX, SCO's forthcoming upgraded UNIX, and Novell's NetWare services.
And to really complicate matters, this 64-bit OS is being written for the
next-generation P7 chip, currently under joint development between HP and
Intel.
Clouds on the horizon
The P7 microprocessor, of course, directly threatens the RISC-based UNIX
divisions of IBM (PowerPC), Sun, Fujitsu, Toshiba (SPARC), and Silicon Graphics
and NEC (MIPS), which have long touted the performance superiority of their
own microprocessors. The ramifications of such events are still being digested
by the industry, but they are likely to cause some workstation manufacturers
to think twice when it comes to fulfilling any unification specs involving
HP and partner Intel.
Not that Intel intends to wait until the P7 is ready before it takes on
the RISC vendors. In both the US and Japan, Intel has already done a good
job of signing on PC vendors for its Pentium Pro chip (formerly known as
the P6) that offers better integer (but not floating-point) performance
than any of the current RISC-based systems, including the latest UltraSPARC
workstations from Sun. Intel has proven every bit as aggressive and paranoid
as its software counterpart, Microsoft, when it comes to squashing the competition.
And it is this fear of any potential rival, no matter how small, that has
forged the "Wintel" monopoly into an awesome and seemingly impregnable
Deadly Duo, a force not seen since IBM had its days in the sun.
Yet, not all is as well for the US computer industry as it may appear. Japanese
and Asian manufacturers are busily working to undermine the foundations
upon which the US has built its global success. Most of the semiconductor
manufacturing equipment for chip-making and the materials for CD-ROMs, DRAM
memory, floppy disk drives, monitors, keyboards, mice, and liquid crystal
displays -- components on which US systems vendors depend to build their
hot boxes -- are now made in Asia. Japanese manufacturers have also cleverly
laid the groundwork to become the suppliers of next-generation rewritable
compact disk technology that will replace today's CD-ROMs. Now that agreement
between the two warring technology camps, led respectively by Sony/Philips
and Toshiba, has been reached, the stage is set for Japanese factories to
supply the world with Digital Video Disk (DVD) systems that will hold 4-to-5
gigabytes of data on a single-sided disk, providing more than two hours
of MPEG-2 compressed video.
All this should make it clear that, while the "Wintel" combo is
keeping most Japanese PC systems makers meekly watching from the sidelines,
it is Japanese and Asian factories that are keeping the Windows-Intel juggernaut
rolling along at top speed.ç
(c) Copyright 1996 by Computing Japan magazine