[opendtv] Experts: design offshoring yielding mixed results

  • From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
  • To: <opendtv@xxxxxxxxxxxxx>
  • Date: Fri, 3 Nov 2006 16:01:36 -0500

Somewhat interesting article, in view of next week's elections.

Seems to me that I have seen this cycle already three times, in my
lifetime. First, with Europe post WWII, then with Japan, now with China,
Korea, Taiwan, India, Singapore.

The urge to move offshore is impossible for US companies to resist.
International treaties or no makes no difference. And eventually, the
urge is lessened because cost of living and wages in the previously
low-cost labor and/or design well reach of even surpass those in the US.

(Of course, countries like India and China are like gigantic uncharged
capacitors. It would take an enormous current before any reverse voltage
shows up.)

Problem is, there is no entity that credibly "controls" any of this.
This happens in spite of anything politicans are likely to do. In large
part, because political campaigns are incredibly expensive, which means
politicians know very well who they have to be beholden to. And too, any
stringent laws which might benefit engineers will also increase the
price of fun toys for everyone else. No one, except possibly engineers,
really wants this. That's why WalMart and Target survive.

Even if, as engineers, we all end up being product specification writers
for WalMart in the near term, my sense is that this situation will
reverse itself of its own accord in time.


Experts: design offshoring yielding mixed results

George Leopold
(11/03/2006 1:21 PM EST)
URL: http://www.eetimes.com/showArticle.jhtml?articleID=193501675

WASHINGTON - The globalization of semiconductor design is providing some
competitive benefits for U.S. chip makers but is roiling the U.S. job
market for engineers, a university study concludes.

A survey conducted by Clair Brown and Greg Linden of the University of
California at Berkeley and presented at a National Academy of
Engineering workshop on engineering offshoring found that the U.S.
remains the leader in advanced chip design. But growing costs,
competitive pressures and globalization are reshaping the industry in
ways that are just now being understood.

"So far, offshore activities appear to complement design activities with
expansion" in the U.S., the authors found. 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-are providing U.S. chip makers with competitive advantages,
the study found. 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 authors 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

The study 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, the study 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, the study found. 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 offshoring to India and China will stifle U.S. innovation as it
confronts stiffer global competition.

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