Do we have a brain balance deficit?

Offshoring is shorthand for offshore outsourcing. It can be either the practice of hiring temporary employees in another country or hiring a subcontractor that performs the required job outside the USA. The latter is the more prevalent form of offshoring in the electronics industry. Of course a more permanent form of offshoring is to establish a corporate presence in another country with either engineering or manufacturing resources. Usually the primary reason for offshoring is a desire by companies to reduce their labor costs, although in specific cases the reason is to obtain expertise the company does not possess. India, China, Russia, Eastern European countries, Ireland, Israel, and Egypt are the most popular countries in the electronics field that host offshoring activities. The U.S. Department of Labor’s Bureau of Labor Statistics found that between 2000 and 2004 the number of U.S. technical workers in electronic engineering and computer sciences has dropped by 221,000. Although not all of the losses can be directly attributed to offshoring, the practice has had an impact. In addition the yearly salaries survey conducted by the IEEE in 2004 shows that, for the first time, the median salary of its members in this industry has declined from the previous year. Gary Smith, Managing VP at Gartner Dataquest says that although his firm has not conducted a specific study of offshoring trends, it has evidence that the U.S. is loosing Printed Circuit Boards design jobs to mainland China and Embedded Programming jobs to India. Designs of complex System on Chip (SoC) appear to remain in the U.S. for the time being.

The myth of the engineer
The shortage of qualified staff is the most common justification for offshoring. The number of students who choose to pursue an engineering career is diminishing due to both social and economic pressures. The job market trends are certain to contribute to the decision by students to avoid electronic engineering and computer science as their degree of choice. Engineering is not seen as a glamorous career. Society paints engineers as narrow-minded people only concerned with the details of their jobs and not interested in social or political issues affecting their lives outside of their jobs. The comic strip character Dilbert typifies the way the general public views an electronic engineer. Awkward in establishing social relationships, especially with women, Dilbert dresses with a high disdain for fashion. He labors to apply engineering principles under the guidance of an incompetent manager and suffers the absurd requirements dictated by the marketing team. Not once does he try to maneuver himself out of this intolerable situation, but accepts it as the natural order of things. It is no wonder that American students prefer to pursue another profession.
Engineers have, unfortunately, aided in strengthening this stereotype by not having established a strong professional organization like medical doctors and attorneys have done. The largest professional organization in the electronics industry, the Institute of Electrical and Electronics Engineers (IEEE), lacks the lobbying clout of similar organizations in the other professions. The vast majority of engineers, even those with graduate degrees, in the electronics industry are salaried employees, so they do not have the luster of attorneys or medical doctors who project an image of individual professionals. Judging by the makeup of the Congress and Senate of the United States, engineers are not interested in politics and very seldom run for office. Thus few engineers are household names. Most of those who have name recognition by non-engineers, have received it for achievements outside of the profession, using their managerial and business capabilities. As salaried employees, engineers cannot aspire to accumulate wealth the way other professions do, so it is not a surprise if young people choose a different career.

The myth of the H1-B visas
The leadership established by American Universities in scientific graduate studies has attracted foreign students to pursue a graduate degree in the United States. After earning their degrees, many desire to find a job in the United States in order to either refine their knowledge with some years of practical experience, or, in many case, to earn a permanent visa status and build a life in the USA. In most of these cases jobs like the ones the student has prepared for do not exist or are in very short supply in their home countries. These students cannot work in the US unless granted special dispensation after being sponsored by an American company who can certify that it cannot find a qualified US resident or citizen for the position. If approved the student receives an H1-B visa that is valid for three years and can be extended for another three, for a maximum of six years. During that period the student can apply for permanent resident status if he or she qualifies. The IEEE and other professional engineering organizations have lobbied heavily for restrictions on the number of visas that can be granted, on the assumption that foreign students are taking jobs from American citizens, in spite of the certification by the hiring company that this is not the case. Presently the number of H1-B visas that can be granted yearly is 65,000. The limit was temporarily raised to 195,000 during the 2001-2003 period. With the communication infrastructure in place and the growing sophistication of companies offering design and manufacturing services in developing countries, American engineers are confronted with competition not only from qualified foreign students in the US, but from designers demanding lower salaries in their home country. The latter has proven a much more formidable form of competition and also more negative to the American economy. Many American companies in both the software and the electronics industries are asking Congress to increase the number of H1-B visas granted, since they cannot find qualified US citizens or permanent residents to fill the jobs available. Engineering organizations are resisting this action fearing competition from foreign students. The position of these organizations is not logical. The jobs that go unfilled are eventually going overseas with little chance of ever coming back. In addition a foreign national working in the US pays US taxes (including Social Security), shops in the locality where he or she is employed, and contributes not only to the economy but also to the society in general often bringing new cultural approaches to every day life. Keeping the number of H1-B visas low is not a solution to the migration of engineering jobs overseas, in fact it may be a catalyst to increase the percentage of work subcontracted through offshoring.

The myth of senior jobs
Almost every pundit speaking about offshoring and its impact on engineering employment in the US states that senior positions will always remain in the USA, because the most experienced engineers are here and will remain here. Of course experience is the product of time and type of project. Offshore companies are now undertaking challenging design projects, and, as engineers in those companies learn the vagaries of EDA tools, they will become more experienced and ready to tackle projects just as complex as those done here. Many foreign national engineers employed in the US are now occupying very senior positions in design teams, and you can find foreign born professionals, especially from India and both Taiwan and mainland China, in senior executive positions in marketing, operations, and even the CEO office. Therefore the managerial talent with knowledge of local customs in offshore countries is available, thus the cost of managing the process of offshoring is diminishing. As regions within a developing country mature from the influx of funds from offshoring, some of these experienced professional will return to their native countries and bring with them the expertise required to develop an independent technological and managerial base, no longer at the mercy of decisions taken in the US. Once this base is in place, venture capital will follow and may even replicate the history of Silicon Valley. EDA is the sector that is most likely to see such transformation first because it requires a small initial investment for product development.

Prospering in a global economy
Timely product introduction is more important than keeping development costs to a minimum, especially when the product is destined for the consumers market. Offshoring is inherently riskier and has a higher overhead cost than keeping the project entirely in-house. Systems companies face a difficult dilemma in choosing between lower engineering costs and increased schedule determinism. The maturing intellectual property (IP) industry may offer a solution. Companies like Qualcore, with offices both in Sunnyvale, California, and Hyderabad, India, provide both design services and off-the-shelf IP cores ready to be integrated in a system design. The company leverages both lower salaries and benefits and the excellent academic training of elite Indian students to develop mixed signal cores for its clients. Analog designers are at a premium in the U.S. because our academic institutions have focused to develop a large number of logic designers to support an industry focused on computing. The switch of emphasis to communication has created a scarcity of resources since logic designers find the switch to analog design quite difficult to make. It is possible that the present concentration of SoC designs in the U.S. can continue by taking advantage of the system integration experience of engineers based in the U.S. and IP cores available from other countries. But the scenario is not static and changes in economic and social conditions in some offshoring countries. Especially China and India may still alter the profile of the industry. The living standards of regions that are benefiting financially from offshoring activities are rising. With improved living conditions, some of the experienced professionals working in the U.S. will decide to return to their native countries, providing the core of experienced senior business people required to encourage and sustain the growth of an indigenous industry. Venture capital is sure to follow and the work opportunities once offered only by offshoring will be augmented by opportunities offered by national companies. These countries are also the ones the present the greatest opportunities for growth in the consumer market, so the newly established companies will have an indigenous market eager to absorb their products. As far as the EDA industry is concerned this scenario presents two problems, one of market management and one of foreign competition. The growth of the foreign component of the EDA market will required U.S. based companies to pay more attention to Asian and East European regions. A service industry must follow its customers, so the requirements of American companies will loose some of their importance as EDA companies try to satisfy a growing number of foreign customers. The growth of experienced technical talent in countries like India and China, and the availability of capital is likely to also foster the development of EDA startups in those countries. The practice of the industry to grow by acquisition will become much more complex as the leading companies will have to deal with the complexities of local laws in acquiring technology from foreign startups. It is also possible that a country like China would want to develop its own EDA tools suite once they have the necessary expertise, since EDA is of strategic importance to the semiconductor industry and the latter is fundamental to the security of a country. The growth of EDA will depend directly on how successful its leaders will be in managing increased globalization. It is imperative to find a way to insure that brain deficit does not join the trade deficit on the balance books of this country. The steps available to correct the problem are neither simple nor do they offer a rapid solution. Colleges and Universities must make a collection of physics and electronics courses a requisite for a bachelor degree in electrical or electronic engineering. They must put more emphasis on architectural analysis to prepare students to understand the consequences of system level tradeoffs. Given the global nature of the competition for technical jobs in the electronics field the U.S. government must develop more realistic immigration policies that allow deserving foreign students to pursue a career in the United States and restrict the creative use of job descriptions by companies interested only in hiring less costly designers. Some individuals have proposed fiscal remedies, almost always in the form of taxation. Although such approach seems fair to engineers by leveling employment costs, it is unrealistic because it would make U.S. products less competitive worldwide. Waiting for China and India to reach the same level of quality of life and cost of living as Western Europe seems unrealistic.