(FORTUNE Magazine) – Get ready for fireworks. Five huge Japanese electronics companies--Fujitsu, Hitachi, NEC, Sony, and Toshiba--have decided to make the $47-billion-a-year U.S. personal computer business the target of their latest foray for market share. As recently as May, only Toshiba, which dominates laptop computers, and NEC were present at all in the U.S., the stronghold of American PC leaders such as Compaq, IBM, Gateway, and Dell. But like the Americans, the Japanese have come increasingly to view the PC as a pivotal product in the digital age and are determined to be global leaders; that makes the U.S., which accounts for 37% of the $128 billion a year of PCs shipped worldwide, too important to ignore. So the fuse is lit for a marketing war.

If all five hit their ambitious goals, they could command well over 50% of the American market within five years. That outcome is unlikely, yet the Japanese push is sure to trigger shock waves. It will further accelerate the industry's breakneck rate of innovation, hastening the long-predicted fusion of computing and consumer electronics. And it will make the business of building PCs an even tougher way to earn a buck, squeezing strong players like Compaq and pushing toward crisis weakened ones like Apple.

"The fear of Japan was invoked too early," says market expert Bob Djurdjevic of Annex Research in Phoenix, recalling how U.S. computer executives worried about a Japanese threat in the Seventies and Eighties. "The time is now." Though U.S. PC companies generally won't discuss their rivals, one senior executive nervously predicts, "We're in the beginning stage of consolidation in the PC business, and the Japanese are going to accelerate it."

Bad news for U.S. computer makers may be cause to celebrate for customers, however--particularly anyone in the market for a home PC. That sector is where the Japanese will concentrate a big part of their effort, though NEC and Toshiba also aim to compete across the board in laptops, desktops, and servers intended for business use. Consumers can expect to see faster-than-ever gains in PC performance without increases in price, plus abundant innovation in features.

The products speak for themselves. Sony is offering PCs with unprecedentedly high-quality audio and video capabilities in products designed eventually to anchor an entire household of electronic wonders. Toshiba's $2,350 Infinia is a full-fledged PC/TV. Hook it to your cable box, and you can watch CNN (or professional wrestling) on all or part of the screen. Hook it to your VCR, and you can pull video off a cassette for inclusion in a multimedia presentation. Some Japanese companies are also unveiling much simpler PC-like devices. For example, in September, Sony launched a set-top box that lets consumers surf the Internet on their TV screens.

Such products are sure to prompt responses from Compaq, Apple, and other nimble U.S. home-PC makers. If the new Japanese models catch on, they could help introduce computing to millions of households still entirely focused on TV. That is how Intel CEO Andy Grove, whose company supplies microprocessors to almost all the PC makers, applauds the arrival of the Japanese: "I view myself as being in a heroic battle against the TV as the center of the entertainment world, and this is a colossal step in the progress we're making." Adds Chris Shipley, editor of DemoLetter, an industry tip sheet: "Traditional PC makers have probably pushed the consumer market as far as they can. It will take outsiders with consumer electronics experience like Toshiba and Sony to break into a larger consumer market."

The Japanese are also making a big push in laptops, a segment of the U.S. market in which Toshiba already commands a 23% share, according to International Data Corp. in Framingham, Massachusetts. The first U.S. moves by Fujitsu and Hitachi were to launch state-of-the-art notebook models last May.

What makes the ambitions of these companies worrisome to U.S. incumbents? In part, it's the same old story: Japanese high-tech giants with deep pockets, skill at building crucial components on a vast scale, great factories to fill--and a willingness to sacrifice, or at least defer, profits for growth. To dwell for a moment on size: The biggest of the bunch, Hitachi (1995 revenues: $84 billion), is larger than IBM; the smallest, Fujitsu ($39 billion), is the 54th-largest corporation on earth. Such numbers make Compaq ($15 billion) and Gateway ($4 billion) look puny. And as to brand recognition, Sony towers over everybody: A Harris poll this year found it the most respected consumer brand in America, topping even Procter & Gamble and Coke.

While past invasion attempts have failed--a few years ago, for example, a Nippon Steel subsidiary called Librex lost an estimated $100 million selling laptops--the barriers this time may be substantially lower, as computers increasingly become a mass-market item. Indeed, Sony and other consumer electronics powers believe they have little choice but to attack. The U.S. consumer electronics market is vast: According to the Consumer Electronics Manufacturers Association, sales this year should hit $66 billion, reflecting a growth rate of 6%. But fully half that growth derives from home PCs, whose sales this year will swell 14% to $19 billion, estimates Andy Bose at Access Media International USA, a New York City consulting firm. (The U.S. PC market overall is expanding at a 13% rate.) Other key segments, like video and audio, are growing sluggishly because of a paucity of exciting new products--and the diversion of household dollars to home PCs.

Carl Yankowski, who heads Sony's U.S. electronics operation, has watched worriedly as aggressive PC makers like Compaq have added telephone, music, and video functions to their machines. Says he: "It would be folly to simply sit back and observe PC companies moving closer to consumer electronics." He and executives at other Japanese companies believe competing in PCs will also help uncover opportunities in related hardware, software, and services. Explains George Everhart, president of Fujitsu PC Corp.: "Personal computers are going in a lot of different directions at once. Anybody in a related industry has almost no choice but to get into this market."

In a sense, U.S. PC makers brought this invasion on themselves, by attacking the market in Japan. Until the early Nineties, Japan was a personal-computing backwater: The only major market in which standard Wintel machines--PCs incorporating Intel microprocessors and Microsoft Windows operating system software--didn't dominate. NEC, the market leader by far, and Fujitsu sold PCs that used Intel chips but were equipped with proprietary software or nonstandard versions of Windows.

Things started to change three years ago, when Compaq began importing Wintel machines with keyboards and commands adapted to Japanese. Customers snapped up the units; soon Fujitsu brought out Wintel machines of its own, and in a bold bid for market share slashed prices radically. That touched off a price war, transforming what had been a highly lucrative market into a quagmire; last year it helped throw Apple, which had counted heavily on profits from computers exported to Japan, into crisis.

For Fujitsu's Japanese rivals, it was a painful but valuable education. According to Intel, PC sales in Japan are growing at an annual rate of roughly 50%, from five million in 1995 to ten million next year. That gives Japanese PC makers a powerful base from which to target the U.S., says Paul Otellini, Intel director of sales: "You're a lot smarter in the PC business if you've sold tens of millions in your own country."

How much will Japan's PC makers pay to gain U.S. market share? All but Sony insist they expect profits on PCs. Says David Hancock, CEO of Hitachi PC Corp.: "Hitachi is not coming into the market to lose money. We've got a return-on-investment period that's no longer than for any American company." But profits will likely be elusive in the next few years, especially for newcomers Hitachi and Fujitsu, which must set up costly customer-service and support operations. Says Kenjiro Nitta, NEC's top executive in the U.S.: "I can't understand how Hitachi and Fujitsu will stay in this very competitive market." A U.S. PC executive grimly predicts of all the new entrants: "They will bleed red. It's a question of how much they are willing to lose."

A rundown on each company's efforts:

TOSHIBA five years ago was betting that by 1996 laptops would account for fully half the U.S. market. Today they account for only 25%. So the company has decided to broaden its attack by offering home PCs now and desktops and servers for business use by 1998. Currently No. 8 in U.S. market share, with $2 billion or so in annual sales, Toshiba aims to become No. 5 by the end of next year.

To jazz up its Infinia home computers, Toshiba adapted technology from its portables. Like some laptops, the Infinia has an energy-saving, noiseless "sleep" mode, from which it can switch on instantly to perform computing tasks; unlike laptops, however, the machine can also do things in its sleep, such as play music or video and answer the phone.

Toshiba chose to make its first nonportable PC a consumer product partly because it thinks its strength in consumer electronics gives it an edge over other PC makers. By January, well ahead of other companies, it expects to mass-produce players for DVDs, faster, roomier descendants of today's CDs and CD-ROMs. By incorporating the players into its PCs, Toshiba expects to attract techno-connoisseurs who want to pipe video and other multimedia content into their computers.

NEC this spring upped its investment in Packard Bell, a Sacramento company that is the No. 2 maker of consumer PCs. The Japanese company is counting on this and other alliances to improve its position in markets in the U.S. and other nations (NEC also owns a substantial stake in Groupe Bull of France, and is rumored to be negotiating to buy the PC business of Italy's Olivetti). Its goal, according to Nitta: at least 10% market share worldwide by the end of 1997, up from just over 5% today.

Though Packard Bell has lost market share in the U.S. recently, NEC executives think the big company's resources will help Packard Bell come back strongly. One sign of change: This fall look for a new wave of consumer advertising from Packard Bell.

HITACHI "is almost like a candy box. We can leverage resources out of Japan, whether technology or money, because it's a rich company," says David Hancock, CEO of Hitachi PC Corp. He's the first non-Japanese ever to head a subsidiary of the colossus. With notebook PCs, and by next year servers, he expects to expand from the U.S. into Europe and then Asia. "Hitachi is really looking at a global entry into this market," he says immodestly. "I want to be No. 1 in any segment we enter."

As part of its aggressive launch, Hitachi offered five-year warranties on its first two notebooks, the first-ever such guarantee in PC-dom. Even though the machines were only in the market for six weeks during the second quarter of this year, 19,000 sold, according to IDC, giving Hitachi the 12th-highest share.

FUJITSU ranked No. 6 worldwide in the notebook market even before it entered the U.S. "We are a startup on steroids," says executive Everhart, describing the massive scale on which the parent company operates. "For instance, I can get volume prices on components." Fujitsu's aim is to be among the top five in the U.S. notebook market within five years. Though Everhart isn't ready to discuss plans for desktop or server PCs, he warns, "Our charter is to stir up the dust a little." But that doesn't mean Fujitsu will slash prices as ruthlessly as it did in Japan. Since Fujitsu has no brand image in the U.S., Everhart says, he'd rather build a name based more on quality than price.

SONY takes the long view of its U.S. PC enterprise. Says Yankowski: "The convergence is coming our way--toward brands like ours that consumers trust, toward our industrial-design expertise and our infrastructure for dealing with retailers. But this is the first step in a journey of a thousand miles. It probably won't be seen as the PC business by the time we're the leader in it." What does that mean? Yankowski waxes visionary: "You'll have a wireless home network linking together a series of displays, which tie together sound and data that relate to your lifestyle. You'll have a display inside your refrigerator. The magnets on the fridge will turn into the convergence of audio, video, computers, and communications in the kitchen."

After pausing to catch his breath, Yankowski boasts about Sony's track record in PC-related innovations: It invented the 3.5-inch floppy disk, now the world standard, and co-invented the CD-ROM. Its strength in such areas helps explain why Yankowski says Sony doesn't have to make money on PCs themselves: It hopes to cash in on premium-priced peripherals, like Trinitron monitors.

Right now, Sony's home PCs may be the hottest around. "We've been selling every one we could get for three weeks before there was even any advertising," says Bob Gunst, CEO of Good Guys, a West Coast retailer that was the first to carry the Sonys. Consumers are snapping them up even though they are priced about $100 above comparable PCs.

American PC makers have spent years gearing up for Japanese competition, and lately have worked hard to redesign and differentiate their home-PC offerings in particular. Hewlett-Packard is selling systems to manage and print family photographs. IBM is offering PCs that can run home appliances and monitor heating and cooling systems. Compaq, which in 1983 launched the first portable PC--a 28-pound anvil of a computer that nonetheless was a hit--now has a glitzy home machine with a lightweight LCD screen and built-in handle that is designed to be lugged from room to room (see photo). Such innovation comes none too soon. If the new Japanese entrants can show that a true mass market for PCs is possible, still more consumer electronics giants, like Sony's archrival Matsushita, are bound to follow before long.

REPORTER ASSOCIATE Henry Goldblatt