WASHINGTON The U.S. retains its innovation edge in electonics, but experts said the globalization of innovation is transforming the technology landscape in ways that could threaten U.S. leadership.
Semiconductor, computing and software technologies are central to the ongoing debate over how globalization is transforming innovation. Experts at a symposium here on Friday (April 21) said the impact of globalization and outsourcing have so far been mixed. As high-tech manufacturing jobs move offshore, design and other value-added activities remain here. In some cases, U.S. design engineers have moved to Asian manufacturing sites so they can forge closer ties between design and production teams. That has spurred innovation.
Profound structural changes in the capital-intensive chip industry like the rise of Asian foundries and the shift to a fabless model "have altered the innovation process," said Jeffrey Macher, an economics profesor at Georgetown University. "Globalization of innovation reflects changes in key aspects of the [semiconductor] industry.
"Process innovation is an essential complement to product innovation for [IC] manufacturers," Macher added.
Macher said leading U.S. chip makers actually have an incentive to invest overseas as a way to tap into new technologies they can use to "extend and augment [their] capabilities." The rewards in terms of innovation are worth the economic and political risks, he said.
Macher concluded that manufacturing and industry activities like component R&D have moved offshore, but innovative activities like development fabs "have mainly stayed at home."
The innovation picture for PC industry is murkier, especially the notebook segment where PC makers focus on "systems innovation" while working mostly with Taiwanese partners on joint design and development work. While most computer R&D is shifting to China, particularly with the emergence of manufacturers like Lenovo, design innovation remains here. The problem, said Ken Kraemer of the University of California at Irvine, is that consumers want cheaper laptops, not innovative designs.
While PC production has shifted offshore, the impact on U.S. employment has been minimal, Kraemer argued. The reason is that the U.S. industry employs only about 30,000 workers. The long-term issue is what impact the offshoring of PC manufacturing will have on future U.S. job creation, he added.
The exodus of much software development has proven to be a lightning rod in the U.S. debate over outsourcing. But an expert at the symposium said the U.S. remains the clear innovation leader in terms of patents. Chris Forman of Carnegie Mellon University said software services are being outsourced, mostly to India, while innovative database and office automation software continues to be written here.
That could change, however, if the steady decline in federal research dollars continues along with the decline in U.S. computer science graduates, Forman said.
For now, the experts concluded, America retains the keys to innovation. The question, they added, is for how long?
David Morganthaler, an engineer-turned-venture capitalist, said he observed the steady decline of Rust Belt cities like Cleveland and Pittsburgh during his engineering career. "Will the Rust Belt's fate be the fate of the U.S. in 40 years?" Morganthaler warned.