Impacts of Globalization and Offshoring on Engineering
Employment in the Personal Computing Industry
by Jason Dedrick and Kenneth L. Kraemer
Globalization has changed the nature, organization, and
location of engineering work in the personal computing industry.
As a consequence, lower skill and lower paid engineering jobs
that might have been created in the U.S. are instead being
created overseas, while higher skill and higher paid jobs
remain in the U.S. The engineering work that remains in the
U.S. requires skill in traditional engineering disciplines,
as well as in the intersection of engineering and computer
science, and in new specialties such as small form factor
design, communications and networking, software engineering,
and the interfaces between these. Software engineering in
particular is becoming a greater part of engineering work
in innovative new products such as smart phones and handheld
devices which add functionality through tightly integrated
hardware and software. For PCs and components, embedded software
enables large scale, low cost production of standard physical
products that can be provided with different features, tailored
to particular markets, and continually updated to extend product
life.
The nature of work done by branded PC makers has changed
from physical engineering concerned with building, testing
and mass production, to conceptual design, planning and product
management, with physical engineering largely done outside
the branded firms. The PC firms initially did all phases of
new product development in-house, but subsequently outsourced
manufacturing of desktops to contract manufacturers (CMs)
in the major world regions and outsourced development and
manufacturing of notebooks to original design manufacturers
(ODMs), mainly in Taiwan. Today, much desktop development
is also being handed off to ODMs.
As production and development was outsourced, the location
of engineering jobs also shifted. For instance, notebook development
and manufacturing was originally done mostly in Japan and
in some cases in the U.S., but these activities steadily moved
to Taiwan, which developed the required skills and had lower
costs. More recently, Taiwanese ODMs have moved engineering
work to mainland China for even lower costs and proximity
to manufacturing.
Interviews with executives in charge of new product development
in branded PC firms indicate that the jobs that remain in
the U.S. are relatively small in number, and require highly
skilled, innovative people with considerable experience. Accordingly,
U.S. engineers earn high salaries, which have grown steadily
in recent years, that commensurate with their skill, experience
and productivity.
Historical data and national statistics on the entire computer
industry show no significant change in the number of engineers
since 2002. There is no comparable job data for the personal
computing industry, per se. However, while the personal computing
industry has continued to grow in scale and complexity, increasing
the need for engineering work, it appears that there is little
or no growth in engineering jobs in the U.S. This can partly
be explained by the greater productivity of engineers, but
also has been accompanied by a large increase in engineering
jobs in the CMs and ODMs, especially in Taiwan and China.
Within this context, the nature of engineering work that
remains in the U.S. is being shaped by the newer, smaller
personal computing products such as wireless notebooks, tablet
notebooks, PDAs, MP3 players, and smart phones. Such work
requires not only knowledge about engineering design for small
form factor, but also requires new engineering specialties
related to communications, networking, embedded software,
and particularly the interfaces between these and hardware
engineering.
Interviewees in PC companies said that there was generally
a good balance of supply and demand of engineers in the U.S.,
but pointed to shortages in experienced managers (product
managers, engineering discipline managers, project managers,
high level design mangers) and in particular, engineering
sub-disciplines mentioned in the body of this report. While
a few firms carefully develop engineers through sourcing from
elite engineering schools, most of the PC firms source “experienced
engineers” from other firms.
All firms interviewed source at least some engineers outside
of the U.S., some primarily for cost, others for specialized
knowledge. In some cases they hire engineers in offshore facilities,
but more commonly they hire foreign-born engineers to work
in the U.S., often from U.S. universities. All the executives
considered U.S. immigration policies flawed in substance (failing
to consider industry need, treating all engineering jobs/levels
alike, making it difficult for graduates to stay in the U.S.)
and in limits on the number of visas. On the other hand, most
executives felt that the offshoring of lower skill engineering
jobs was inevitable and that the U.S. should concentrate on
maximizing its strengths in more dynamic and analytical skills
to continue to lead in development and commercialization of
innovation.
This report was prepared through the Personal
Computing Industry Center (PCIC) at UCI’s Paul Merage
School of Business, which is one of 22 Industry Centers currently
supported by the prestigious Sloan Foundation. Ken Kraemer
and Jason Dedrick are co-directors of PCIC, which conducts
basic and applied research for understanding industry trends,
analyzing emerging markets and technologies, and providing
insights about new developments. Click here
to view a PDF copy of the report.
(CRITO Research Spotlight, February 2007)
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