First off, let me say at the outset of this column that I’m a fan of intelligent globalization. My understanding of what turned the 1929 market crash into a depression was protectionism under Smoot-Hawley. That point has been argued back and forth repeatedly, and I weigh in on the side that it was bad.

Now that I’ve made clear my vantage point, I’m hearing a lot of complaints from engineers these days that too many jobs are disappearing to Asia and that companies are only using H1-B visas to cut more expensive jobs and replace them with lower-paying jobs.

Let’s take a look at several scenarios—and I welcome your comments because I don’t pretend to have all the answers—and examine some consequences.

·      The U.S. government does nothing. The problem is that total inaction on the part of the federal government has been shown to be disastrous. In 1837, and again in 1839, president Martin Van Buren sided with the camp that no action by the federal government to control the successive panics was the right approach. Van Buren became known as Martin Van Ruin and the downturn lasted until 1845, which was the longest downturn in the history of the United States. What eventually brought the U.S. out of the Great Depression in 1929—a misnomer in comparison to the Panic of 1839—was federal government involvement and debt financing. So the government has to do something—but what?

·      The government can create protectionist barriers. That reduces overall sales while increasing inflation because the price of manufacturing domestically is higher than internationally. Offering subsidies and rebates is the same thing in reverse, which virtually every major economy does for industries it believes it needs to be strong. China did that with its foundries and design houses; the United States does that for solar energy companies and everything Green. Canada does it for farmers. Subsidies are much harder to measure than tariffs, however, and often fall under the radar of market watchers. But in real terms they’re basically the same thing. The problem for electronics companies in the United States is they don’t get subsidies, while in other countries they frequently do—sometimes in the way of cheap land or utilities or low taxes for 50 years. In a global economy, the field needs to be level. Otherwise, it needs to be explained loudly and clearly that you can’t do business with a country until they clean up their act.

·      H1-B visas are a blessing and a curse, and the blame for the latter can be split among lots of different groups. Companies are complaining they’re not getting enough expertise in the United States, so they have to either hire more foreign students or go overseas. There is some truth to that. Part of it is also disingenuous. If engineering and science were billed as the only way to solve global warming and save the planet—and they are, short of everyone giving up their cars, televisions, cell phones, etc.—then we’d have no shortage of students pounding on the doors of universities. This is a major shortcoming of both universities and teachers in k-12, and it’s something that needs to be driven by electronics companies and politicians. At the same time, if we extended more visas for foreign students, we’d have plenty of them sticking around and adding something to our melting pot of ideas—and enough to tide us over until the numbers rise in the schools.

Each of these problems is more complicated than anyone can comprehend, and there are many sides to each of them. But tough times demand well-understood solutions, and knee-jerk reactions are bad for business in the short term and the long term.

What do you think?

–Ed Sperling

Downturns have a way of changing things forever—sort of like the earthquake of 1812, which permanently re-routed the Mississippi River in three places. And while the common thinking is that things will go back to where they were before, they never do.

For one thing, the trend isn’t just smaller, faster, cheaper. It’s also shorter development cycles. Incredibly complex chips now take 12 to 18 months to design, verify and produce, versus three years a decade ago.

The only upside is that the basic designs sometimes last longer before they become completely obsolete. Moore’s Law is slipping, if it even applies at all. Trying to fit the formula into multicore chips and, in some cases, stacked die, is a stretch. And many companies have abandoned the Moore’s Law approach altogether, saying that older process nodes are sufficient for getting the job done.

Another change that is irreversible is globalization. There are more opportunities, more markets, and more trained people around the globe. The downside is more competition for skilled engineers at all levels—and that trend will only grow.  What used to be done in the United States, Europe or Japan can now be done using global teams.

The silver lining is that the cost of labor is less of a deciding factor. Global companies are paying the same wages around the globe for top talent. Instead of being reduced to the lowest common denominator, some companies are paying top dollar for engineers no matter where they are. IBM is a case in point. Experts say that will become more common over the next few years.

That also will fuel new market growth in some densely populated areas, such as India and China, where the opportunity for growth dwarfs the market for every piece of electronics that has ever been sold. 

In the system-level design space, where engineers live and breathe complexity, that also means the creation of new approaches and tools. While many companies still develop their own tools, best of breed is becoming a necessity rather than an option. And black-box strategies, such as TLM 2.0 and IP-XACT, will become necessary evils among engineers who were trained to understand every step of every action they take. And like the other irreversible trends, once these are tried and implemented there is no turning back.