The offshoring debate cuts to the heart of U.S. competitiveness, national security and job insecurity. It also asks, almost incidentally, whether Silicon Valley will lose its central role in the electronics industry. Indeed, it's a debate in which everyone seems to have an opinion, but no one has a clear view of all the details.

In a Jan. 16 report to George W. Bush, the President's Council on Science and Technology (Pcast) recognized that offshoring has created "a deep sense of anxiety in the IT community that our nation is not just losing the manufacturing capacity of 'commoditized' products, as has occurred in the past, but also . . . high-value-added manufacturing and services that the U.S. has long dominated."

The news isn't all bad, though. The debate has produced cries from all sides to boost spending on R&D and science and technology education in the United States. And it is calling upon rank-and-file engineers to hone their skills in anticipation the next big development that will give them and their companies an edge.

Forrester Research (Cambridge, Mass.) estimates that 3.3 million jobs could be lost to offshoring by 2015, half a million of them (representing $28 billion in lost wages) in the technology field. The biggest impact lies in moving skilled computer-programming jobs offshore, the firm said.

But "no one has hard numbers on this. We have to start counting what's actually going on. People on both sides have been using selective data," said Ronil Hira, chairman of the IEEE-USA's career and workplace committee and an associate professor of public policy at the Rochester Institute of Technology.

The IEEE issued a position paper last week calling on the U.S. government to start tracking offshoring. "Anecdotally, in discussions with IEEE members, we know it's not just low-level jobs but good engineering and research positions that could go offshore," said Hira, who has twice testified before Congress on the issue.

IBM and other top high-tech companies taken to task for going overseas argue that they are merely expanding into growing markets, not shuttering U.S. operations. Since 1979, most of IBM's employees have worked in countries other than the United States, the spokesman said. Moreover, since 1987, countries other than the United States have accounted for most of IBM's revenues, the spokesman said. "Offshoring is a misnomer when you are doing business in 164 countries. We've been in India for 50 years," the spokesman added.

For its part, Intel Corp. claims 70 percent of its revenue comes from outside the United States, though 60 percent of its employees still work in the States. But those percentages are shifting.

IEEE's Ronil Hira is looking for some hard numbers.

"With 70 percent of revenues coming from overseas, you have to invest in those markets, but you don't walk away from the investments you made [in the United States]. It's not a zero-sum game," an Intel spokesman said.

Texas Instruments Inc. set up its first offshore chip-packaging plant in Tokyo in 1964, about the same time companies such as Fairchild and Motorola Inc. were setting up similar plants in Hong Kong and in Kuala Lumpur, Malaysia, said Mentor Graphics chairman Wally Rhines, a former TI executive. Intel followed suit in 1971 with a plant in Penang, Malaysia, and a year later, one in Manila, Philippines. Those sites now handle much of Intel's packaging R&D.

In 1984 Rhines helped establish TI's first engineering center in India, a 30-person shop doing analog and mixed-signal design. That center and ones like it for TI, Analog Devices, ST-Microelectronics and others have grown to employ thousands, procuring their own EDA tools and demanding local support for them, according to Rhines.

The globalization of design is "still in the relatively early stages, I guess," Rhines said. "But you still need [U.S.] project managers-people to coordinate the work, drive the strategies, develop the architectures. Every time you create a job offshore, you create one onshore."

More recently, systems companies have jumped on the bandwagon. Thomson struck a partnership last year with China's TCL to make all of both companies' TV sets in China. 3Com Corp. inked a similar deal with China's HuaWei for networking gear.

The processor design group at Sun Microsystems Inc. has a few engineers in India working on validation and CAD tool design, said Michael Splain, the team's chief technologist, but most chip design remains in Sunnyvale, Calif.

"We are using offshoring judiciously. As we grow, that's a place where we look for new people. But we are not closing design teams in the U.S. and moving design jobs into other countries," Splain noted.

"The bills coming out are really knee-jerk reactions against offshoring. Isolationism and trade barriers are the wrong way to go," the IBM spokesman said.

In March alone, both top presidential candidates and Federal Reserve Chairman Alan Greenspan fired volleys about offshoring. And both the IEEE and American Electronics Association have drawn up fresh policy statements on the issue. High-tech vendors also have formed a new coalition to speak out on offshoring.

"We need an open, honest debate about what's going on and what to do. We're getting mired in an emotional dialog that's not helpful in moving things forward," said Hira of the IEEE.

The good news is all sides seem to be converging on an agenda to boost U.S. spending on R&D, improve education in science and technology and bolster tax incentives. In addition to those recommendations, the January Pcast report called for an analysis of and response to foreign tax incentives and faster mechanisms to address intellectual-property and market-access issues in the World Trade Organization.

Pcast also called for a new national R&D center to drive innovation in fresh areas such as nanotechnolgy, countering the scaling back of corporate research seen at groups like Bell Labs. Some engineers think that's exactly the right approach.

"Anything we would do in protectionism would backfire," said Michael Krause, a senior I/O engineer at Hewlett-Packard Co. "We have to grow our exports and find the next set of things to start doing right, especially in fields like bioengineering and nanotechnology."

However, China is already the second-largest producer of technical papers on nanotechnology, noted the IEEE's Hira in testimony last year before Congress.

The Computer Systems Policy Project, an ad hoc lobbying group of computer companies, recently called for doubling the federal spending on university-level R&D in physical sciences and engineering as well as a national broadband policy. The group, which includes the chief executive officers of Dell, HP, IBM and Intel, noted that in 1999, the U.S. granted only about 61,000 bachelor-level engineering degrees, compared with more than 103,000 in Japan, more than 134,000 in the European Union and more than 195,000 in China.

John Steadman, president of the IEEE-USA, noted that as many as 80 percent of students enrolling in U.S. graduate-level programs in engineering are from outside the United States. The IEEE-USA wants to see stipends for graduate positions boosted and restrictions enacted that would prevent non-U.S. citizens from receiving government grants for university research projects.

In its March position paper, the IEEE-USA also called for restricting offshoring of any government work unless that work clearly poses no threat to U.S. competitiveness and security. It further proposed expanding training programs for displaced workers, and it called for the government to close loopholes in H1-B and L-1 foreign worker visas and develop a national strategy to bolster R&D and education in the United States.

"I think Congress will hold hearings on offshoring, but given it's an election year I give it about a 50-50 chance of happening this year," Steadman said.

The unemployment rate for electronics and electrical engineers averaged a record 6.2 percent last year, according to the Department of Labor's Bureau of Labor Statistics. What's more, the group said, total EE employment in the United States fell by 37,000 jobs to 349,000 at the end of 2003, stats the IEEE blamed in part on offshoring.

In a worst-case scenario, some engineers see the United States taking on the role of specifying software and chip design that's done elsewhere, which suggests that only a top tier of engineering could remain stateside. In that scenario, Silicon Valley would become just another node on the global design network.

"The Internet is like a Star Trek transporter where you have meetings that can go on anywhere. You don't need to have the factory right next to R&D," said Chuck McManis, a technical director with Network Appliance Inc. (Sunnyvale, Calif.), which is transferring design for one of its products to a new Bangalore center (see story, page 66). "It's clear to me [offshoring has] shifted the balance of how things are being done," said an R&D manager at a large computer company who asked not to be identified, noting many startup design companies in China and India are knocking on his door. "There are a lot of people who have left the Bay Area and taken their Silicon Valley skills back to their home countries with them," he added.

"Companies can still form in Silicon Valley and be competitive around the world," said Intel's Barrett in an interview in The San Jose Mercury News. "It's just that they are not going to create jobs in Silicon Valley."

Surprisingly, many working engineers in Silicon Valley take a pragmatic view of the situation.

"I wouldn't say there's fear, but there's an awareness," said McManis of NetApp. "Some people are asking themselves whether this is the field they really want to be in. But I have seen people more motivated by this new [job] mobility. "You need to ask yourself what you as an engineer are going to offer that these guys in India don't."

For McManis, it's expertise designing serial backplanes based on Infiniband, a technology defined by an ad hoc consortium and used in NetApp's latest products. "All of that's being driven in the U.S.," McManis said.

Indeed, Silicon Valley still represents a unique concentration of big companies, such as Cisco and Intel; startups and their venture capital backers; and several top universities. The entrepreneurial spirit and sheer drive to win here still hold promise to keep pushing electronics to new levels.