90percent of world's engineers will be in Asia by 2010

from Control Engineering January 4, 2006

In a speech to San Jose State University’s College of Engineering, James W. Bagley, chairman of Lam Research Corp. addressed the U.S.’ diminishing capability to maintain competitive manufacturing leadership and parity.

....when mobilized, the U.S. can accomplish near miracles. The solution is simple: convincing political leaders that the results of the U.S.’ degenerating, competitiveness problem can be far greater than the national disasters—such as have been recently experienced. And it’s probably a greater threat to the country than some of the ideologies that the U.S. is currently confronting.

He focused on China, which now is becoming competitive in manufacturing technology, software and engineering capability across the spectrum, physics, chemistry, and biotechnology. Whether through design or luck, China has co-opted the largest retail organization—WalMart—into being its worldwide distribution system. The result of this distribution capability has been a disruptive transformation in balances of trade virtually across the globe and has allowed China to become a country with substantial foreign currency reserves. As anyone in business knows, market access is an imperative and is usually achieved through substantial investment and hard work. China got their warehousing, distribution, and retail outlets at no cost.

During these 20 years, what was happening in the U.S.? It has promoted fair trade, open-market access, lower duties, and so on. U.S. motivations were positively based, expecting open trade improvements to the economies of most of the third-world countries, allowing them to be markets for U.S. life-enriching products based on U.S.-developed intellectual property and value-added services which would in turn improve the standard of living of U.S. citizens. The result has been somewhat different from what was envisioned 20 years ago.

The U.S. is outsourcing manufacturing at an alarming rate. China is creating manufacturing jobs at a rate equivalent to the entire U.S. manufacturing workforce each year. The U.S. is facilitating that growth rate by outsourcing its manufacturing jobs to China in order to compete with Chinese goods derived from U.S.-created intellectual property.

Examples from Lam Research and the semiconductor industry:

• Approximately 80% of (Lam Research’s) advanced etcher systems are sold and installed in Asia.
  
• Three companies in Taiwan are building more leading-edge 300mm plants than are being built in the United States. The vast majority of the leading-edge 300mm facilities being built in the world are being built in Asia.
  
• (The U.S. has) gone from the largest market for semiconductors and the largest producer of semiconductors to a deteriorating second place when compared to Asia.

Some recent eye-opening information from Jay Pinson, dean emeritus of San Jose State was:

• Today the U.S. graduates about 55,000 engineers a year—with the rate declining for the last 20 years;
  
• Both law and business students graduate at about three times this rate (about 330,000 in the aggregate);
  
• India graduates 300,000 engineers annually;
  
• China mints 350,000 new engineers each year; and
  
• Aggravating the situation is the fact that, of the U.S.’ 55,000 graduates, a meaningful percentage are foreign nationals who may or may not stay in the United States.

The U.S. cannot compete with India and China on a raw-numbers basis, nor should it—look at a combined 650,000 engineering graduates as opposed to its 55,000—because India and China are competitors. What the U.S. should focus on is dramatically increasing the number of its engineering and science graduates in those areas where it can develop and maintain a competitive advantage.

Projected over time, the engineering graduate gap, by 2010, will result in over 90% of the world’s engineers living in India, China, and the rest of Asia. This is underscored by the large number of U.S. engineering graduates now retiring, who were motivated to engineering careers due to the space race that began with the 1958 launching of Sputnik....

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