Posted on 11/22/2006 5:06:29 PM PST by indthkr
WASHINGTON — The U.S. engineering community is wrestling with the quickening pace of offshoring—and what, if anything, should be done about it. As they work to document the extent of offshoring in areas such as chip design, experts are trying to get their arms around globalization's implications for the engineering profession and, more important, for the future of U.S. innovation.
Recent examinations of the issue by some of the profession's top thinkers have found that the United States remains the world's leader in areas like advanced chip design. But there's concern that the U.S. lead could be shrinking and that rising costs, competitive pressures and the global transmission of intellectual property are reshaping the engineering profession and the nature of innovation in ways that are just beginning to be understood.
Part of the debate focuses on whether location matters in engineering. Some argue that a connected world renders a company's location irrelevant. Others say proximity to clusters of innovative startups, corporate R&D labs, universities and venture capital (think Palo Alto's Sand Hill Road) are the pistons that drive the engine of innovation.
Both sides have a point, Charles Vest, president emeritus of the Massachusetts Institute of Technology, told a recent offshoring workshop here. But however you view it, "globalization is the new reality."
That reality has translated into an estimated 60,000 manufacturing plants being built by foreign companies in China between 2000 and 2003, according to the National Academy of Engineering. During that period, an estimated 400,000 U.S. IT manufacturing jobs were lost, a presidential advisory panel estimates.
Vest told the workshop sponsored by the National Academy of Engineering that the high-tech industry along with R&D and innovation itself are "migrating and morphing." This sea change is being driven by economics—mostly by lower overseas wages, tax and trade policies and global networks.
Another driver is speed and complexity, Vest said. "Everyone is in a hurry" to rush innovative products to market, and only the nimblest will survive to reap a return on their staggering investments. The laggards will morph into something else or vanish.
New models of how innovation works are also emerging. Vest cited IBM CEO Sam Palmisano's concept of a "globally integrated enterprise" as the successor to the multinational corporation. In this model, technologies are borderless and technical standards are based on global technology.
An "open innovation" model postulated by Harry Chesbrough of Harvard Business School posits that companies must integrate the best ideas regardless of where they originate.
Vest and others insist that the U.S. remains the world's leader in technology innovation with the best research universities and R&D infrastructure. "The enemy I fear most is complacency," Vest said.
In agreement were other experts at the workshop who have focused on the impact of offshoring on specific technologies like semiconductor design.
"So far, offshore activities appear to complement design activities with expansion" in the U.S., researchers Clair Brown and Greg Linden of the University of California at Berkeley told the workshop. But the "long-run impact on U.S. leadership and jobs [remains] unclear."
In the meantime, China and India will grow in importance as markets and suppliers of engineers and design skills, they added.
Lower overseas labor costs—as low as 90 percent lower in some locations, according to Brown and Linden's research—are providing U.S. chip makers with competitive advantages. The "ideal result" of the offshoring trend would be that U.S. companies "will grow and hire more workers at home and abroad." But the researchers warned that some U.S. engineers will lose jobs due to the offshoring of design projects and "only the remaining [overseas] workers and consumers [will] benefit from the firm's move offshore."
Their research also found that competitive advantages are offset by other costs associated with design offshoring. These include: the need to describe design tasks more precisely to overseas design teams; extra controls on intellectual property, especially in China; increased management costs; and reduced productivity and slower product cycles. Together, these factors raise the risks for offshoring chip design and R&D projects, they concluded.
In order to counteract the disadvantages of offshoring and maintain U.S. technology innovation and job creation, the U.S. needs to maintain its strong university system, observers agree. Policy makers also need to restore U.S. economic stability to promote continued investment in innovation and a "transparent and globally-integrated financial system [that] is necessary for private investment."
The debate over offshoring is getting louder, with all sides in the engineering community weighing in on the future implications for employment and innovation. Much of the debate has shifted to assembling reliable data such as labor statistics to determine the overall economic impact of outsourcing projects like chip design. Critics worry that a new wave of offshoring to India and China will stifle U.S. innovation as the U.S. confronts stiffening global competition.
Other observers note that recent political shifts in the U.S. may strengthen the hand of organized labor, which provided much of the financial backing for Democrats to recapture control of Congress. In return for campaign contributions, labor groups will press lawmakers to put the breaks on offshoring as a way to preserve U.S. manufacturing jobs, observers said. What impact that might have on the future of U.S. innovation remains unclear.
Nearly everyone agrees that investments that support and nurture the world-class U.S. university system along with rigorous graduate training are the keys to maintaining U.S. innovation, and perhaps serve as an antidote to globalization.
But a growing number of U.S. engineering school graduate are foreign students. How to keep them here is the subject of a heated debate in the engineering profession over the number of high-tech H-1B visas the U.S. should issue each year. Professional groups say the H-1B program is mismanaged. Industry groups counter that the program is vital for U.S. competitiveness.
"We need to retain as many graduates as possible, especially with advanced degrees, to win the global innovation competition," Robert Doering of Texas Instruments told the workshop.
Eventually people will wake up and discover that we have offshored all our manufacturing and much of our value-added functions (like design and engineering). All that will be left is a huge client class and people who govern & clean up after them. Oh, yeah, and we'll be deeply in debt, too. All in the name of, what? What a sorry bunch us baby boomers have turned out to be.
Republicans have too, unfortunately the Republicans representatives in Congress haven't realized that yet.
Don't worry! Once we outsource ALL of our jobs, we can all sit at home, run up our credit cards, and buy lots of great cheap stuff! Yeearrgh!
They should worry about coming up with some new engineering ideas instead of concerning themselves with immigration arcana. That would solve the whole problem.
It's about time! But I thought the GAO had that task years ago.
But a growing number of U.S. engineering school graduate are foreign students.
At first I thought, Hey! what about getting more of our youth into our schools. Then I remembered. American workers must compete.. it's globalization time!
How can an American run-up tons of debt just to compete for a job that corporations want to pay Indian or Chinese wages?
Then I recalled this morning ..
I heard the guest host on Rush's show hang up on a caller from the "rust belt."
The caller's message was that not all is well employment-wise where he lives. The guest host hung up and proceeded to advise the listeners that, there 'ya go.. another one who wants the government to take care of him.. votes Democrat I bet -- today it's competition! American workers must compete! So advised the guest host and he's right except..
Compete with a $10-a-day worker while you are in an economy that demands $1,000+ a month just to pay the rent? Go figure.
Oh.. and by the way. We need you American youths to join up and fight to keep us nice and cozy here.. but don't come looking for handouts when you get back to civilian life.. get in there and compete with those $10-a-day workers. I am sure the guest host would agree with that.
Yep. I'm all for free trade with countries that do not have barriers to our products. AFAIK, there is no such country.
"Eventually people will wake up and discover that we have offshored all our manufacturing and much of our value-added functions (like design and engineering)."
Not everyone is sleeping:
"Other observers note that recent political shifts in the U.S. may strengthen the hand of organized labor, which provided much of the financial backing for Democrats to recapture control of Congress. In return for campaign contributions, labor groups will press lawmakers to put the breaks on offshoring as a way to preserve U.S. manufacturing jobs, observers said. What impact that might have on the future of U.S. innovation remains unclear. "
Or maybe an apologists answer to theft by a country that they are dying to do business with.
"Compete with a $10-a-day worker while you are in an economy that demands $1,000+ a month just to pay the rent? Go figure."
Isn't it interesting, Americans have drawn out most of the equity that was available in their homes, now what are they going to use to buy foreign manufactured goods?
Walmart is cutting prices trying to keep things going but it's difficult to sell to folks that are feeling pinched because of the globalist activities of companies like Walmart.
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