Outsourcing issue flares up at chip conference

On August 23, the same day the California Senate passed a bill that would ban state agencies from contracting services out to companies that use overseas labour, opponents and proponents of offshore outsourcing clashed during a conference at Stanford University.

A panel of two venture investors, a scholar, a laid-off software engineer and two chip industry chief executives debated the issue. Most panelists came out in favour of moving jobs overseas, to the dismay of many attendees at the Hot Chips event sponsored by the Institute of Electrical and Electronics Engineers (IEEE).

“I think outsourcing is good for Americans; it creates jobs in America,” said T. J. Rodgers, founder, president and chief executive officer of Cypress Semiconductor Corp.

Rodgers disputed the notion that offshore outsourcing is rampant. “We’re not going at a tremendous speed outsourcing jobs; it is simply not true,” he said. If critics of outsourcing were to look at publicly available statistics, they would find that “there is no catastrophe,” Rodgers said.

But Ron Hira, an assistant professor of public policy at Rochester Institute of Technology and chairman of the IEEE-USA Career and Workforce Policy Committee, took issue with those statistics. There have only been self-interested, industry-sponsored studies that don’t tell much, he said.

“How much work has actually moved offshore? No one knows, because nobody has collected data on it. I think this is a major failing of government policy,” Hira said. The Department of Commerce is doing a study, but it is unlikely to bring up new information because it is underfunded, he said.

Despite his criticism of the research, Hira said it is clear that offshore outsourcing is accelerating. “It is a really bad deal for workers,” he said.

Carl Everett, a partner at Silicon Valley venture capital firm Accel Partners, argued that outsourcing offers an opportunity companies should take advantage of. By using offshore capabilities, they can bring a product to market faster and at a lower cost, which will increase profitability and ultimately generate jobs, he said.

Natasha Humphries has a different perspective. Humphries was laid off last year from PalmOne Inc. after having trained workers in Bangalore, India, to do her job as a software quality assurance engineer. “Increased profit margins will create new jobs, but they may not be in the U.S. and they may not pay as well,” she said.

Humphries also noted wage depression as an effect of offshore outsourcing. Salaries of between US$75,000 and $125,000 a year for individuals with her skills are no longer the norm. “My skills are still marketable, yet I can’t market them at the same price,” she said.

Some audience members appeared anxious about the prospect of losing their jobs to outsourcing. They chimed in with calls to panel members to pressure the U.S. government to take action against outsourcing. Questions were also asked about how to motivate students to study engineering when the job perspective is grim.

Rodgers of Cypress Semiconductor said taking a protectionist stance would ultimately cost more jobs than it would save because of a backlash by trade partners. “We will be a big loser and there will be a lot more people on the streets if you start attacking outsourcing,” he said.

And when it comes to students, Cypress Semiconductor is hiring. “Our plan is to hire about 2,000 engineers over the next five years,” Rodgers said. However, there is a caveat. “We will go wherever we need to go to find those engineers.”

U.S. companies should create jobs in new areas such as biotechnology, nanotechnology and fuel cell technology, said Vinod Dham, co-founder of NewPath Ventures LLC, which invests in companies that do most of their work overseas. “Where is the next event that will create a boom in the market for jobs?” he asked.

Meanwhile, the California bill banning outsourcing for government agencies is expected to pass the state assembly, according to local news reports. The bill will then land on the desk of Governor Arnold Schwarzenneger, who has yet to take a position on it.

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