Computer manufacturing: change and competition

Monthly Labor Review, August, 1996 by Jacqueline Warnke

Electronic computer manufacturing. Computers can range from supercomputers, costing up to $35 million,(10) to personal computers and laptops, costing less than $500. It is more useful to look at the types of computers separately to understand the changes in the direction of electronic processing which are taking place in the electronic computer market segment (SIC 3571). The Computer and Business Equipment Manufacturers Association divides computer types into mainframes, minicomputers and microcomputers.(11)

Mainframes were the first commercial computers, and are the largest, most powerful computers available. This category includes supercomputers and massively parallel computers (a new type of computer that consists of hundreds. of microprocessors, and whose performance can exceed supercomputers). As table 2 shows, in 1975 this segment of computer manufacturing made up 15 percent of the total units shipped and 76 percent of the value of shipments. Estimates for 1995 show that mainframes will make up only 1 percent of units shipped with the value of the shipments at 29 percent.

Table 2.
Distribution of market share by type of computer,
1979 and 1995

[In percent]
                    Unit         Value
Computer type
                 1975   1995   1975   1995
Mainframe         15      1     76     29
Mini computer     61      2     23     25
Micro computer    24     97      1     46

Table 3.
Price and speed of computers, selected years,
1975-95
                                                    Price per
                       Million                      million
Year   Device          instructions   Price         instructions
                                                    per second

1975   IBM Mainframe        10        $10,000,000   $1,000,000
1976   Cray 1              160         20,000,000      125,000
1979   DEC VAX               1            200,000      200,000
1981   IBM PC             0.25              3,000       12,000
1984   Sun 2                 1             10,000       10,000
1994   Intel Pentium        66              3,000           45

Computer parts and peripherals are particularly sensitive to demand for exports; the U.S. Department of Commerce estimates that more than half of the labor force in this industry is engaged in jobs related to exports.(28) Sales to foreign countries are vital to the entire computer industry's growth, and should they weaken, so too may employment. In fact, "foreign operations now account for more than half of the total revenues of many leading U.S. suppliers, and some report foreign sales amounting to 70 percent of their total business or more."(29) The only major computer market that the United States does not donlinate is Japan, where local companies control 70 percent of the market.(30) In other foreign markets, governments "continue to pursue restrictive trade and investment policies that adversely affect U.S. exports by limiting imports" and by supporting domestic computer industries through "`buy national' procurement policies, low-interest financing, and export subsidies."(31) Thus, the health of the U.S. computer industry is particularly vulnerable to worldwide competition and economic cycles experienced by our major trading partners.