Category Archives: Outsourcing

Manufacturing – what’s going on here ?

Over on Michael Collins discusses off-shoring and in-shoring:

"From 1994 to 2004, U.S. companies invested more than $48 billion in China, exported $200 billion in goods to China, and imported a staggering $1 trillion from China. Although China is the most popular source, South America, Mexico, India, Canada, Russia, and the Eastern European countries are all increasing their exports to the U.S.

American companies see sourcing from foreign countries as a good solution for lowering their costs.

On the other hand, foreign companies have invested $40 billion in assets in the U.S. and now employ 6 million workers. This is called “in-shoring.”

. . .

Foreign manufacturers have learned that the best reason to inshore or build plants in the United States is to be close to their customers and the markets. They can avoid all of the problems of shipping products into America, plus they can monitor the customer’s wants and needs. Market proximity is a big advantage and everyone seems to have figured that out but American manufacturers.

If other countries are so successful at building plants in North America and have proved that they can do it with our employees, taxes regulations, and suppliers, why can’t American manufacturers do the same thing?"

Don’t Take That Rebate Check to Wal-Mart

From Al Norman on the Huffington Post:

"Wal-Mart is waiting for your check.

The world’s largest retailer, which made $819,976 in sales every minute during the fourth quarter of its 2007 fiscal year, is expecting to see you walk through its doors with an IRS rebate check in your hands. But there is a more patriotic thing you can do. "

. . .

Silicon Dragon: How China is Winning the Tech Race

Over on the Huffington Post, Rebecca Fannin discusses how the rising supply of technical talent and surplus capital is turning China into the ‘Silicon Dragon’:

"Don’t be surprised if the next Steve Jobs comes from China. Already, I can see the beginnings of this trend in the likes of entrepreneurs Jack Ma of e-commerce startup Alibaba, Robin Li of search engine Baidu, Gary Wang of video sharing service and Joe Chen of web 2.0 powerhouse Oak Pacific Interactive. Not only did they develop products at the same time or ahead of their U.S. counterparts, but they are beating big American brand names Google, Yahoo, MySpace and eBay in China.

Back in the mid-1990s dotcom bubble, a coffee shop called Buck’s in upscale Woodside, California was the epicenter of innovation, the place where business plans were scribbled on napkins and startups seeded. Today, the compass has shifted east to China.

Zhongguancun Software Park is in a northwest corner of Beijing, on the way to the ancient Summer Palace of past Chinese emperors. The sprawling district is one of several new bustling high tech and science zones. It feeds off graduates from Tsinghua University and Beijing University — just like Stanford University grads helped to transform California’s Silicon Valley from fertile agricultural land to tech central some 30 years ago.

The "in" thing among bright, young Chinese techies is to do a startup, get financing, scale it to sizeable revenues and profits, and then go public. An army of so-called technopreneurs like Wang are turbo-charging world-class enterprises. Call them collectively a new rival to the Valley’s tech dominance, or Silicon Dragon.

A rising supply of tech talent and surplus venture capital is feeding the dragon. Thousands of Western-educated and trained young Chinese have returned to their native homelands with advanced degrees and Valley entrepreneurial know-how to crank up businesses. The reforms of former Chinese leader Deng Xiaoping and his often-quoted 1992 phrase, "to get rich is glorious," unleashed change, and tech entrepreneurship has proved to be a golden path to cashing in.

There’s still a lack of managerial and leadership experience at many Chinese tech startups that puts them at a competitive disadvantage in building successful enterprises. But there’s no shortage of technical engineering talent.

Boosted by low operational costs, booming consumer demand and surging economic growth, Chinese startups are ramping up and reaching profitability at lightning speed. Today over 65 Chinese companies trade on NASDAQ and the New York Stock Exchange. Just as recently as 1999, none did. Moreover, several Chinese firms have surpassed $3 billion in market capitalization.

Today’s China is switched on: the world’s largest number of mobile phone users (500 million), the second-largest number of Internet users (162 million) and two of the top 10 web sites globally. China also accounts for 24 percent of the world market for semiconductors.

Chinese goods once stood for cheap knockoffs found in Wal-Mart, but with the Internet revolution, young Chinese "sea turtles" began churning out close imitations of Google, eBay, MySpace, Amazon and Yahoo. Today, home-grown super-innovators are coming up with cutting-edge advances for cell phones, chips, ecommerce and software.

In 2006, China chalked up the world’s fastest growth rate for new patent applications, a 56 percent increase to 3,910, ranking it eighth globally. The gains are driven in part by Chinese President Hu Jintao’s pledge to make high-tech innovation the cornerstone of economic growth.

Liu Yingkui is one of the new innovators. Over drinks in a Beijing bar, "King" excitedly tells me that his company, Oriental Wisdom, makes advanced software for customer sales management. It works on mobile phones, not personal computers. At his office in the Haidian high-tech district of Beijing, Jeff Chen demonstrates a browser called Maxthon that has Microsoft scurrying to adapt features for Internet Explorer. Near Tsinghua University, Charles Wang introduces me to Pingco, one of the world’s first free instant messaging services for mobile phones. At Nanchang University in southeastern China, Jiang Fengyi, founder of Lattice Power Corp., shows me how he is cranking out new-fangled lights that promise to replace standard bulbs. Over a Chinese box lunch at his Shanghai high-rise headquarters, Shi Zhengrong, chairman and CEO of Suntech Power Holdings, tells me he holds 11 patents for producing lower-cost solar panels.

China is leapfrogging past a legacy of outdated formats that stymie western firms. Because of the size and stature of China’s markets, such innovations could set world standards for technology.

Granted, China faces enormous economic, legal and social challenges and claims a fraction of the world’s tech innovations. Lenovo personal computers, Haier appliances and Huawei electronics goods are early examples of Chinese tech brands that have emerged globally. Over the next decade, China will increasingly become a nation of innovators rather than smart copycats or manufacturers. "

State of the engineer: Immigration–The reactionary side of engineering

Over on Automotive Design Line, David Benjamin discusses the latest EE Times 2007 Salary Survey results with respect to immigration:

State of the engineer: Immigration

Another $16 Billion leaves the USA

From The Huffington Post:

"Cisco is dropping dollars like they’re going out of style.

Cisco (nasdaq: CSCO – news – people ), the world’s largest network equipment maker, announced Thursday morning a plan to double its investments in China through venture capital, manufacturing and education. The $16 billion expansion will take place over the next three to five years.

Chief Executive John Chambers said: "We’re going to the next chapter for Cisco in China." "

Can “Made in the USA” make a comeback ?

"San Jose Mercury News: Op-Ed, 24 October 2007

"Made in the USA" can be Revitalized

It’s no accident that Apple’s iPhone and Boeing’s 787 are receiving global applause. Both are highly engineered products manufactured by experts who use advanced technologies and high-volume, cost-effective production methods. This is the kind of know-how that once established "Made in the USA" as the global standard to beat.

The iPhone, however, is manufactured in Taiwan. The Boeing 787 is assembled in Japan. America, birthplace of the modern assembly line, is losing ground when it comes to putting things together. Driven by short-term savings and ignoring the close relationship between innovation and manufacturing, America has relinquished this responsibility to ambitious foreign competition, who are investing in fundamental research that improves manufacturing processes and luring our finest researchers overseas. America produces roughly 75,000 engineers per year. China graduates ten times that number. India produces close to a million.

But quality control weaknesses in overseas manufacturing of toys, tires, and toothpaste have resulted in huge losses in reputation and value, environmental repercussions, and employee layoffs. Our overseas competitors are learning from these lessons and developing advanced automation to ensure consistent product quality. The next wave of high-value products will require assembly at the micro and nano scales, where manual labor is no longer an option. These trends suggest enormous opportunities.

US manufacturing is not a lost cause: the production of goods from consumer electronics to industrial equipment accounts for 14 percent of the U.S. GDP and 11 percent of U.S. employment. But U.S. manufacturing today is where database technology was in the early 1960’s, a patchwork of ad hoc solutions that lacked the rigorous methodology that leads to scientific innovation. That all changed in 1970 when Ted Codd, an IBM mathematician, invented relational algebra, an elegant mathematical database model that galvanized federally funded research leading to today’s $14 billion database industry.

Manufacturing needs the same treatment. Just as the method to add two numbers together doesn’t depend on what kind of pencil you use, manufacturing abstractions can be wholly independent of the product one is making or the assembly line systems used to assemble it. Another precedent is the Turing Machine, an elegant abstract model invented by Alan Turing in the 1930s, which established the mathematical and scientific foundations for our now-successful high-tech industries. Without Turing’s theoretical work, the system that typeset this line wouldn’t exist.

What’s needed today is an analogy to the Turing Machine for design, automation and manufacturing. Recent developments in computing and information science have now made it possible to model and reason about physical manufacturing processes, setting the stage for us to "put the Turing into Manufacturing". The result, as was the case with databases and computers, would be higher quality, more reliable products, reduced costs, and faster delivery.

With the signing of the America Competes Act on August 9, 2007, Congress is authorized to appropriate $33.6 billion into new science and technology programs. Let’s use this opportunity to revitalize America’s attitude toward manufacturing. Investing a small portion of our national resources into a science of cost-effective, resource-efficient manufacturing would benefit American consumers and support millions of workers in this vital sector of the US economy. Such a research program would benefit health care, agriculture, and transportation, and strengthen our national resources in defense, energy, and security. The resulting flurry of research activity would invigorate the quality and productivity of "Made in the USA" for the next fifty years.

— October 2007, By Ken Goldberg (UC Berkeley) and Vijay Kumar (U. Penn)

With input from Ruzena Bajcsy (UC Berkeley), George Bekey (USC), Brian Carlisle (Precise Automation), David Dornfeld (UC Berkeley), Erika Fuchs (Carnegie Mellon), Pradeep Khosla (Carnegie Mellon), Yoram Koren (U. Michigan), Peter Luh (U. Connecticut), Matt Mason (Carnegie Mellon), Deirdre Meldrum (Arizona State), Richard Pearson (NCMS), Sanjay Sarma (MIT), Shankar Sastry (UC Berkeley), Warren Seering (MIT), Jeff Trinkle (RPI), Richard Volz (Texas A&M), Peter Will (USC), Paul Wright (UC Berkeley), and John Zysman (UC Berkeley).

Ken Goldberg is Professor in the College of Engineering and School of Information at the University of California at Berkeley. Email:

Vijay Kumar is Chairman of the Department of Mechanical Engineering and Applied Mechanics at the University of Pennsylvania. Email:

Contact:, "

The Future looks bleak

From the latest novel by Greg Iles, "True Evil", the evil genius character Dr. Eldon Tarver ruminates about the upcoming confrontation with China and others. Seems highly prophetic to me:

"Like William Braid, America seemed hell-bent on self-destruction. She was squandering her power in half-fought wars and exporting her manufacturing base to future enemies – in short, practically begging for Darwinian retribution."

"The future was barreling toward America with such momentum that nothing could stop it, and any child of the Cold War should have seen it five years ago. That future was China, an ancient empire reborn as industrial superpower, a single-minded engine of economic expansion that cared nothing for ethics, the environment, loss of life, or the destinies of other nations. This insured that in a very short time, China would be locked in mortal combat with the only other monolithic power on the planet. And the United States, Tarver knew, was woefully unprepared for this Darwinian battle for survival."

"The battle between the United States and China would begin as a cold war, with leaders on both sides denying that a conflict even existed. But in a world of scarce resources, industrial giants could dissimulate for only so long. The first skirmishes would occur in the area of international trade, then escalate into the realm of international banking. Long before armies ever faced each other on land or sea, the targeting coordinates of nuclear missiles on opposites sides of the globe would be changed to reflect the new reality. And for the second time in history, the world’s smaller wars would recede into the background as children grew up in the shadow of a polarizing conflict that brought with it a unique and almost comforting order."

"Unlike the last cold war, this one would not drift along for decades, punctuated by self-limiting crises. Because the Chinese weren’t the Russians. The Russians, as Tarver often told his colleagues, were basically just like us: white Europeans with a strong Judeo-Christian heritage, despite whatever lip service they’d paid to communist denials of God. But the Chinese were most assuredly not like us. When push came to shove, the Chinese were capable of destroying half of their population to wipe us off the face of the earth. As Mao once said, ‘If nuclear war kills half a billion of our people, we will still have half a billion left.’ And then he’d laughed.

But Mao had not been joking. War with China was inevitable, and Eldon Tarver knew it. But unlike the professional ostriches now running the country, he wasn’t content to sit back and watch it happen."

China is not the problem

"China is many things, and as you might expect in a country with a population of 1.3 billion people, not all of them are good.

The Mattel toy recall is only the latest in a long string of problems emanating from the world’s most populous country. Deadly dog food, shoddy workmanship in a broad range of products, counterfeiting and rampant theft of intellectual property—particularly in electronics—are just some of the problems that China has unleashed on global markets. There will be more, as China becomes more global and relies on exports as much as outsourced manufacturing to fuel its explosive growth.

All of this is an outgrowth of the consumer age. With consumers firmly in control and able to compare prices globally, pricing has become far more important than almost anything else, except maybe on hot new products such as the iPhone (at least during the first few months of their introduction). Large retailers such as Best Buy, Costco and Wal-Mart have recognized this phenomenon, creating their own brands and squeezing consumer electronics manufacturers and component makers to knock down their prices .

The result, as expected, is that things aren’t always made as well as they are by more experienced manufacturers and designers, with more margin available to get things right. The question is what can be done about it, and the answer is not much in the short term.

While consumers may come to look at “Made in China” as a stigma of shoddy workmanship, “Made in Japan” carried the same stigma back in the 1950s and 1960s. Unlike Japanese products, however, which were made by Japanese companies that were competing against products made by companies in other countries, China’s are integrated with every other major economic power on the plant. In fact, they’re inseparable. China’s woes are the woes of consumers around the globe, and they’re not going away.

That integration of businesses, caused largely by disaggregation of the supply chain, has made it impossible to pressure China to float its currency. The fact that China has funded the United States’ recent debt has only exacerbated that situation. In fact, the only thing that other nations can do to improve quality and eliminate problems is to work side by side with Chinese companies to raise their competitiveness.

To anti-globalization forces, this may seem like teaching the tiger to hunt. Sooner or later, when the tiger gets hungry, it eats the teacher. But first of all, it’s important to put the blame in the right place. If consumer electronics giants are outsourcing their products, it’s their responsibility to oversee all aspects of manufacturing and production. Just as Mattel has to take responsibility for potentially harmful toys, retailers have to make sure that everything in their stores is well made.

Second, while it’s easy to focus on the problems in the short term, there is enormous upside in the long term. China’s internal market has barely been touched. Of the 1.3 billion people, only an estimated 250 million people are actively involved in the economic revolution under way in places like Shenzhen, Shanghai and Beijing. That leaves a relatively untapped market of 1.1 billion people, and doing business harmoniously in a country this size should be an overriding economic imperative.

China is just the beginning, too. The country is beginning to offload some design and manufacturing to less-developed countries such as Vietnam, India, and Europe (Eastern and Western), which further expands the global market—not to mention the potential talent pool to design and create new products—for electronic components and all sorts of end devices that contain them.

To simply point a finger say that “Made in China” is a Chinese problem is wrong. It’s a problem for everyone that has outsourced production or design or whatever else they’ve offloaded to lower-cost regions. While the supply chain is disaggregated, the ownership of the problem has not. And that ownership, at least for most of the problems encountered by U.S. and European consumers, is not in China."

The Unending H1B Saga


By Jack Ganssle
(08/06/07, 11:29:00 AM EDT)
Like tossing a lit cigarette out the window onto a bit of dry California brush, some subjects are consistently inflammatory for engineers. If career issues always spark excited commentary, discussion about H-1B visas are like pouring gasoline on a wildfire.

The ACM and IEEE claim that enrollments in CS and EE curricula are falling precipitously. Yet readers respond that those organizations are fronts for industry; that cries of looming shortages are the tools of fat-cat employers to flood the market with cheap imported labor and drive salaries down. Is that paranoia, or does it show a firm grasp of market dynamics?

Others respond that any idiot can see there’s no shortage. "Just look at all of the unemployed engineers I know!" Unemployed friends and relatives make for powerful personal imagery, but just as a single cold or hot day says nothing meaningful about the global warming shoutfest, local and personal anecdotes are tragic but not statistically-significant. The IEEE says there’s practically full employment, but those who think they’re a shill for industry won’t believe them.

What about salaries? Simple supply and demand mandates that a shortage will be accompanied by rising salaries, which recent surveys suggest merely mirror cost of living increases, if that. The paranoid – or, maybe those with that firm grasp of market dynamics – will note that recent increases in H-1B visas could be controlling salary increases. As will exporting work to low-wage countries, a trend that certainly continues to grow.

Data is abundant but is shaded with agendas. I tend to believe some of the IEEE/ACM data about college enrollments since it correlates with much I hear from those in academia. It appears " to me, at least – that there will be a negative bubble of engineers and computer scientists in the near future as we start to graduate plenty of hamburger-flippers but fewer EE and CS people.

But is there a shortage today? I think the evidence for that is sparse. However, there’s little doubt that many companies are lobbying Congress to expand the H-1B visa program, either to fulfill what they perceive is a very real need, or to drive down engineering costs.

One of the best summaries of myths and facts surrounding the H-1B program appeared recently in Information Week. For instance, did you know that about a third of Microsoft’s US workers are here under some sort of visa assistance? Or that slime-sucking legal firms offer programs teaching employers how to manipulate the law to avoid hiring those pesky taxpaying US citizens (see youTube video)?

This marvelous country has traditionally embraced new citizens from all corners of the world, enriching our culture beyond measure. Most of us come from immigrant families, whether recently or generations ago. But we cannot allow immigration policy to be dictated by corporate greed rather than an ethical standard that balances the many tradeoffs.

I’d sure like to see an H-1B debate that’s grounded, first, in what’s best for the national interest, and that secondly addresses near-term practical issues. Actually, that would be a nice way to frame any of the myriad issues facing Congress. Instead, we can be sure that they will continue to do anything that courts big donors and panders to the (often manufactured) fears of the electorate.

Another point of view on H-1B Visas…

"One guy’s view on H1-B visas

I know this is a touchy subject, as well it should be.  I’m going to try to approach this from the perspective of a technology executive who is a US citizen and who has worked in the tech industry since 1999.  For those who know me, you know that this is not a difficult point of view for me to have.  Next time I will write a blog entry from the perspective of a dude who likes watching football and drinking beer … also not a difficult point of view for me to hold. 

. . .