U.S. designers still the best (for now), CEOs say

PALO ALTO, Calif. — U.S. chip designers are still the best in the world, though how long they can hold that position as India and China continue to produce hordes of engineers in the next few years remains an open question, according to EDA CEOs participating in a Thursday (Feb. 2) panel discussion here.

John Bourgoin, CEO of MIPS Technologies Inc., said U.S. chip designers are unquestionably still the best on the whole, though he added that the degree to which that is true varies by specific applications. But with China now graduating an estimated 700,000 engineers per year, Bourgoin said, the situation is likely to change.

Michael Fister, president and CEO of Cadence Design Systems Inc., said that intellectually there is not much difference between engineers in the U.S. and their counterparts in other parts of the world, but that experientially there is currently a big difference.

This is bad news for the U.S., Fister said, because, "It won't take long for some of them to bridge that gap."

Walden Rhines, chairman and CEO of Mentor Graphics Corp., disagreed somewhat. Rhines said that there will always be a shortage of good engineers in the world, no matter how many are produced.

Rhines argued that while U.S. companies have been outsourcing manufacturing in order to take advantage of less expensive engineering labor costs in places like China and India, the outsourcing of design activities has been focused more on harnessing a larger pool of skilled designers. The salary gap between U.S. engineers and their foreign counterparts is already closing rapidly, Rhines said.

The huge number of engineers being trained in China and India will ultimately be good for the whole industry, Rhines argued, because it will result in more good engineers.

Aart de Geus, chairman and CEO of Synopsys Inc., said state-of-the-art design in India is approaching the quality of state-of-the-art design in the West. He said a wave of Indian designers who have lived and worked in the U.S. are also returning to their native country to take advantage of budding entrepreneurial opportunities, which should improve the overall quality of India's design capabilities.

Without mincing words, de Geus also took the opportunity to slam U.S. immigration and H1-B visa policy in the wake of the Sept. 11, 2001, terrorist attacks. Though he acknowledged that controls needed to be tightened following the attacks, de Geus suggested that the U.S. has gone too far.

Though what passes for optimism in the EDA industry has likely changed following years of anemic growth, CEOs nevertheless sounded an upbeat tone Thursday at the EDA Consortium's annual CEO forecast panel. Though the panel lacked bold predictions of high growth for the coming year, panelists suggested that 2006 could be a comparably good year for EDA.

Rhines said, as he has previously, that 2006 could be a good year for EDA because companies have more R&D money to spend on three-year contract renewals than they did in 2003.

Rhines, who is also chairman of the EDA Consortium, said the EDA industry could grow 6.5 percent in 2006 and an additional 8 percent in 2007. He added that he expects higher growth in future years.

Rhines announced that panelist John Kibarian, CEO of process integration technology provider PDF Solutions Inc., has been elected to fill an open position on the EDA Consortium's board of directors.

Thanks for the ping.

Sorry to say, but I believe that EE's will continue to be the engineering group most affected by the move to offshore research, development, design, and production. Every other day, I receive emails talking about another silicon valley company dumping significant research money into an Indian or China facility.

There are numerous reasons for this, including the fact that EE's are notorious for inventing and developing CAD technologies that eventually eliminate their jobs, although CAD makes design and development much more efficient and productive for those who remain in the industry. It also makes migration of design offshore that much easier.

With the CAD tools available today, one good EE can do the work that formally required several, yet...it is still not enough apparently to stem the tide of offshoring.

IF present trends continue, what we will end up here in the US in engineering will be boutique and some selected very high tech industries, and any other custom or OEM design and development that requires lots of interface with the customer.

Ironically, although IT gets all the focus in many offshoring articles, IMO, many IT jobs, particularly those which require good, practical, working knowledge of systems and procedures, as well as customer interfacing, will remain here in the US...at least for now.

Ditto to technical PM jobs which require managing and scheduling those contracts.

Ironically, for these reasons, IT itself is more secure than shrink wrap software development, or hard core electronics system design.

I also see some fo the best design talent in the US continuing to be funneled over to Application engineering and sales. Some of the largest chip vendors (like Xilinx) are using their application and sales staff to do OEM design and development work for larger clients, through networks of distributor based enigneering centers.

DOD is a safe bet for EE's ...for now...but only if you have a security clearance. There is a big push in DOD to move over to commercial plug and play components for military applications....this is going to have an impact down the road.

In addition, DOD, along with other Fed agencies, is continuing to consolidate its contract awards to a few big companies. Ive also been told that, increasingly, DOD SBIR research and development contracts are being hard wired to selected companies, but I cant verify that directly.

All in all, EE's and technical business types, particularly those in business for themselves, are starting to wonder if the long term rewards / risk / cost ratio for doing high end tech business here in the US makes sense. I'm one of them.

A little too much whistling-past-the-graveyard in this article. Who would like to venture a guess as to where the center of the chip industry will be in 2015.

Agreed, I'll guess that the Chip industry, assuming we don't respond to the BeTrayders... will be China.

Meanwhile, the software industry will be in India, again, if nothing is done about the BeTrayders.

BI Vendor CEO Blasts Gates' Position on H-1B No need to eliminate cap on visas, claims Information Builders' Cohen

Q&A by Don Tennant

MAY 09, 2005 (COMPUTERWORLD) - Gerald Cohen, the outspoken founder and CEO of New York-based business intelligence software vendor Information Builders Inc., spoke with Computerworld late last month about the controversy surrounding offshore outsourcing and the H-1B visa program. Excerpts follow:

Bill Gates told an audience in Washington recently that the U.S. needs to get rid of the cap on H-1B visas. What's your position on that?
He's full of it. He says, "I'd hire a lot more American engineers if I could find them -- they're not available, and that's why we're going to China and India." He's going there because it's just cheaper. He can find all the engineers he wants in this country.

A lot of CEOs at companies like yours are saying that they just can't find the people.
That's bull. You know who wants [to get rid of the cap]? The Indian companies. The way the Indian companies work is they have to have a certain number of people here, and a lot more people back there - so they're the ones who want to get all these people in. And they don't even pay them American wages -- they just pay them as cheaply as they can.

But surely you use overseas labor to lower your own costs.
I'm going to put two hats on. With one hat, I say we want to keep jobs in New York City. The other hat says that we want the company to be prosperous, and if I can lower my costs by doing work overseas, the company's more prosperous. But I'm not so sure that's better for the country. How much of your development work is done outside of the U.S.?
We do a little quality-assurance work outside of the U.S. We find it's economical to do the routine kind of QA work [overseas].

What's your response to the unemployed U.S. IT worker who says you should be keeping those jobs in the U.S.?
We have to [do business] economically. It's a real problem. The government is providing us with no help, so we're doing [what we have to do] ourselves.

If you look further down the road, there's going to be a huge drain of IT jobs. A lot of these jobs that go overseas are the spawning grounds for future jobs. So the whole industry's going to move offshore.

What do you want the government to do to help?
[Indian vendors] will bring people into the U.S. cheaply. No! When you [bring people into] the U.S., you have to pay American wages. That would be a minimum standard, for example.

There are a lot of small things that could be done, but I have no solution for how we're going to throttle this in some way.

A lot of people say the education system in the U.S. is failing to provide qualified IT workers. Do you disagree?
That's bunk. Why do you have declining computer science majors? Because every parent is saying, "Why major in computer science when all the jobs are going offshore?" It feeds itself.

And I guarantee you, if it doesn't stop, in a couple years, you're not going to have much of an IT industry here.

Gerald Cohen, founder and CEO of Information Builders Inc.

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