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 costsas low as 90 percent lower in some locationsare 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 offshore."
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.