China's Brains, United States' stupidity

Date: Wednesday, July 31, 2002 1:28 AM

*** H-1B NEWSLETTER ***

Get the Facts on H-1B at
www.ZaZona.com

When I visited China I was stunned to see the amount of foreign investment
going on. It's hard for me to even describe the frenzied building of
skyscrapers and infrastructure. Sometimes I saw skyscrapers with cranes in
every direction. Near Suzhou I saw a mammoth complex under construction that
said something about "Semiconductor Research". This facility was far too big
to be financed by the Chinese government. Fairchild is one of the
international partners:
http://www.semiseeknews.com/press_release3936.htm
" Fairchild previously announced its goal to more than double sales in China
by 2004. The company is also constructing a new 800,000 square foot
state-of-the-art assembly and test facility in Suzhou, China which will
manufacture a broad range of discrete, analog, interface and advanced logic
products."

Here is another partner in Suzhou but keep in mind there are many more:
http://www.electronicstalk.com/news/uiv/uiv100.html
"Universal Instruments Corp is increasing its commitment to China with the
opening of a new US $1 million research and training technology centre in
Suzhou, Jiangsu Province, China."

Even the Japanese are moving to China:
http://www.semi.org/web/wmagazine.nsf/4f55b97743c2d02e882565bf006c2459/225cd811b5059b7888256b8e007c9e08!OpenDocument
"In January Matsushita Electric established the wholly owned Suzhou
Matsushita Semiconductor Co. in China's Jiangsu province. The US$19 million
three-story facility will turn out discretes by the end of next year, and
the company plans to ramp up to 200 million units monthly by mid-decade."

Global corporations may be downsizing in the U.S. but they are ramping up in
China. I think it's just a matter of time before the Chinese take over the
semiconductor industry.

In the article below Al Sisto might deny that outsourcing to China isn't
being used to circumvent H-1B but don't believe it. Check out what a typical
Chinese engineer makes: $4,800 and $8,800 a year and I suspect that those
salaries are on the high side. Also consider the fact that China has no
labor laws, OSHA, EPA, or unions. The bottom line is that operating costs
are far below anything in the USA.

China will definitely provide reasons for global corporations to circumvent
H-1B because all labor in the USA is viewed as too expensive. The race the
bottom of the salary barrel is running at full speed while the American
public is fast asleep. Meanwhile our stupid government is allowing our
technical infrastucture to be given away.

http://story.news.yahoo.com/news?tmpl=story&u=/zd/20020710/tc_zd/942714

China: Bursting with brainpower
Wed Jul 10, 6:27 PM ET
Michael Kanellos

BEIJING--The abundance of manual labor is legendary in this country of 1
billion people, but brainpower is quickly catching up.

While many technology giants are expanding manufacturing plants in China, a
significant number of multinationals are increasingly combing the mainland
for engineers and researchers to handle projects for global applications
that, in recent years, would have been performed in labs in the United
States or Europe.

"I'm hiring Ph.D.s with years of experience for less than what it would cost
to hire a new college grad out of Stanford," said Chief Executive Al Sisto
of Phoenix Technologies, a software company in San Jose, Calif.

At first glance, the trend might appear to be a typical brain drain or a way
for U.S. companies to hire foreign labor while skirting political obstacles
related to the H-1B visa immigration controversy. But executives on both
sides of the Pacific say the hiring is more of a massive talent search aimed
at a new generation of engineers being churned out of China's schools.

Chinese university students are flocking to the industry for a combination
of reasons, including comparatively high salaries, government policies that
encourage technical education, and a booming domestic market. An estimated
700,000 engineers graduate annually from China's schools, and U.S. companies
want to get the cream of the crop.

"We are putting our design centers where the talent is," Intel CEO Craig
Barrett said when asked about the chipmaker's research centers in China and
Russia. "We'll just chase the best talent."

There is no denying, however, that Chinese engineers cost far less than
their American counterparts. Single-degree engineers in China generally make
between $4,800 and $8,800 a year, depending on experience and the company,
according to various sources, not including payments to housing, pension and
medical funds that can raise the compensation figure by 50 percent.

Though penurious by U.S. standards, the engineer's salary is a goldmine in a
country where the average city dweller makes $4,300 or less. Those with
advanced degrees generally earn substantially more but are still a bargain
compared with Westerners, which means the labs in China will continue to
grow.

Nevertheless, many U.S. multinationals say cost is a secondary consideration
to their need to find talent, especially people who are fluent with the
language and familiar with local conditions. For example, Sisto said the
primary language is now Mandarin at Phoenix, the leading developer of BIOS
(basic input-output operating system) software that allows hardware to speak
to software. The company has 18 doctorate fellows on site at its offices in
Nanjing, a city inland from Shanghai on the Yangtze River.

"In terms of raw talent, the master's and Ph.D. students (in China) are
absolutely outstanding," said Dr. James Yeh, director of IBM's China
Research Laboratory.

Work done by Chinese engineers for Western companies runs the gamut, said
Wen-Hann Wang, who runs the Intel China Software Lab in Shanghai.
Researchers in his lab, one of four Intel research groups in China, have
worked on projects to enhance Linux ( news - web sites) technology for
Intel-based telecommunications servers, make the Palm operating system work
with its Xscale chip, write software drivers for the Itanium processor,
create applications for e-mailing videos, and perform BIOS and XML
(Extensible Markup Language) research.

Besides general research, Chinese centers have carved out expertise in some
fields. Microsoft, Intel and IBM have all shifted major portions of their
"natural computer interface" research projects--such as handwriting or
face-recognition and voice-activation systems--to China. While the work will
eventually be incorporated worldwide, some of the results have particular
domestic resonance.

"Especially in Chinese, the interface systems (keyboards) are not natural,"
Yeh said. "I will often ask audiences, 'When was the last time your mother
sent you an e-mail?' The typical response is 'My brother helped her.'"

Research in cellular traffic is also strong. During Chinese New Year,
cellular networks get swamped in a way that researchers from other countries
might never likely experience or fathom. "We are here as a watch post for
this market," Yeh added.

A lifetime of competition
Billion-dollar initiatives such as the 2/11 campaign and the Elite
University Program have boosted the number and quality of local
universities. Through the 2/11 campaign the government spread about $2.2
billion among 100 universities, while the Elite University Program spread
about $1.2 billion among 10 top universities. Overall, 2.9 percent of the
country's gross domestic product goes to education. The government wants
every middle school and most primary schools to be connected with the
Internet by 2005.

"Fudan, Beijing, Tsinghua--they are all famous universities," said F.C.
Tseng, deputy CEO of Taiwan Semiconductor Manufacturing Co. "Less and less
people are going to the U.S. for study."

Competition is the dominant theme when it comes to China's educational
system. The state pays for elementary and middle school, but parents often
supplement it with private tutoring, piano lessons and other teachings.

Not surprisingly, education is one of the strongest drivers behind PC sales
here. It's not uncommon for younger children to start the day at 6 a.m. and
go to bed at 1 a.m., said Carl Yao, a former high-tech executive in Boston
who has returned to China to start businesses.

Many here believe that such strong ambitions are fueled by the desire to
move beyond the repressive legacy of the Cultural Revolution. Red Flag
Software CEO Liu Bo, for example, cites a mandatory assignment he received
at the age of 15 to reap wheat 20 hours a day on a farm outside Beijing in
1974.

"The two years of hardship taught me to face difficulties," he said. "What
could be worse?"

The resulting work ethic--voluntary or imposed--has led to intense
competition within China's educational system. To get into college, students
must pass a three-day exam, which takes place each July. Students are tested
on physics, chemistry, geography, English, math and other topics.

A decade ago, only about 5 percent passed. Now, with the state building more
colleges, about one out of seven gets into a university.

High scores can allow admission to top universities, which in turn can lead
to the best graduate programs and jobs in multinationals. But even for those
at the top of the academic pool, getting a premier job isn't easy.

The Intel China Software Lab gets 3,000 to 4,000 resumes a year, according
to Wang, but only 35 get hired. IBM's lab receives 1,800 resumes from
students with doctorates or master's degrees. It hires 12.

These labs have the most stringent hiring policies within their respective
companies. Yeh said that the rejection-acceptance ratio is higher than at
other IBM labs.

"We are working to provide an environment as good or better than any other
labs around the world," he said.

To get the best recruits, companies form fairly close bonds with the select
universities, creating grant programs, joint research projects, and local
computer education initiatives for teachers and primary schools.

A quandary at the top
For all its engineering talent, however, China remains glaringly low in one
important area: management.

"The universities mix science and engineering together and are more focused
on science," Liu said. "We lack project managers, systems analysts and
developed team leaders."

Like many local executives, Liu learned how to run projects at foreign
companies. After graduating from college and working at a Chinese institute,
he spent time at a Singaporean PC manufacturer, Informix, SCO and Microsoft.

The government is rapidly increasing investment in business degree programs
and executive training, having recently created 62 M.B.A. programs,
according to the China Education and Research Network.

Companies, in the meantime, are taking the initiative to fill the void.
Intel and Phoenix, for instance, rotate Chinese engineers to U.S. offices
for three-month exchanges and subsidize advanced degrees. Employees can also
get free English language training.

"Here they need a huge injection of management," Wang said. "Growing people
is a lot harder than growing technology."

ZDNet China's Danica Wang contributed to this report from Beijing.

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