One of the absurdities of the US-Japan accord on semiconductors – the ridiculous unspoken belief that it is possible to quarantine a part of US industry – the chip producers – from the pricing pressures that prevail in the rest of the world, without causing serious damage to other parts of US industry – the chip users, is brought into sharp relief by the attitudes driving two of Europe’s most successful computer companies, Olivetti SpA and Nixdorf Computer AG. On Tuesday, Carlo de Benedetti was quoted in the Wall Street Journal as saying that product cycles in the computer and electronic businesses were now so short that companies could no longer afford to prove a new product in their home market before trying to export it – products had to be launched for the world market from Day One. Moreover, they had to be manufactured simultaneously in different parts of the world. And, on the same day, Nixdorf was announcing that, almost alone among West German manufacturers, had survived the 1986 deterioration in the market unscathed. And a key reason that Nixdorf has been able to insulate itself to some extent from the negative effect of the soaring Deutschemark is that it fills orders around the world with equipment at least 50% manufactured in the local region. Other continental European currencies are all within the European Monetary System, and so the pain of the rising Mark was minimised and orders could still be filled from Germany; for the UK, the company can supply some of the equipment installed here from Ireland, and Nixdorf also manufactures in the Far East – in Singapore – for the Asian and Australasian markets. It even has a plant in Waltham, Massachusetts for the US market. And because most of its imported components and subassemblies are paid for in dollars, the rise of the Mark meant that those became cheaper, further cushioning its German plants in particular from unfavourable currency trends. The company has also been remarkably successful in its diversifications – after a very slow start, largely caused by the bovine obstructionism of the Deutsche Bundespost, telecommunications are now a major new sector for Nixdorf, growing at more than 100% a year over the past three years and now accounting for 10% of new orders. It even has the contract to install new telephones in the P&0 liner QE2. And factory automation could well be the next big growth area for Nixdorf: the company has been awarded a key computer-integrated manufacturing systems contract by Volkswagen AG.
The success of these two Europeans – and Olivetti’s success is remarkably recent – even five years ago, the company was not taken very seriously by its competitors – underlines the relative failure of ICL, in particular to capitalise on British membership of the European Economic Community. ICL, five years ago a much bigger company than Nixdorf, did only about $1,600m of business in 1986, Nixdorf did almost $2,500m. And currency realignments account for only a part of that. ICL’s laser show in the French chateau, and its establishment of a network centre in Paris (CI No 657, 641) are seen as encouraging signs that ICL really is beginning to treat Europe as its home market. But Bull, Siemens, Nixdorf, Olivetti all have a head start on ICL – and there is still no sign of synergy with parent STC.