High-Tech Research Moving From US To China 426
Hugh Pickens writes "The NY Times reports that American companies like Applied Materials are moving their research facilities and engineers to China as the country develops a high-tech economy that increasingly competes directly with the United States. Applied Materials set up its latest solar research labs in China after estimating that China would be producing two-thirds of the world's solar panels by the end of this year and their chief technology officer, Mark R. Pinto, is the first CTO of a major American tech company to move to China. 'We're obviously not giving up on the US,' says Pinto. 'China needs more electricity. It's as simple as that.' Western companies are also attracted to China's huge reservoirs of cheap, highly skilled engineers and the subsidies offered by many Chinese cities and regions, particularly for green energy companies. Applied Materials decided to build their new $250 million research facility in Xi'an after the city government sold them a 75-year land lease at a deep discount and is reimbursing the company for roughly a quarter of the lab complex's operating costs for five years."
But (Score:5, Interesting)
Fortunately instead of a manufacturing based industry, the US will concentrate on enforcing the concept of "intellectual property" with tough new laws to keep that nation ahead of everyone else in the technology race, while outsourcing the manufacturing to cheaper offshore locations. It's a perfect system.
Er, hang on, guys - where are you going?
History repeats itself. Why the hell should American raw materials be shipped all the way to Jolly Old England to be taxed and manufactured into finished goods that are shipped all the way back to the US, for a huge mark up (and more taxes)? Not so fun when you're on the other end, is it?
I guess the last region to be exploited is Africa. Is it already too late to start buying land?
Sure sure (Score:2, Interesting)
So when the Chinese inevitably steal their research (that's one of China's strengths) those companies that moved their research to China will be looking to the US government to help them cover their losses.
The Difference Between China and the US (Score:4, Interesting)
the city government sold them a 75-year land lease at a deep discount and is reimbursing the company for roughly a quarter of the lab complex's operating costs for five years
When this happens in the US, it is the companies that will make out with the best deal because the US government honors their commitments to legal contracts even when they screw over their citizens. I imagine that these businesses think the same thing will happen in China.
When they are settled in China, it will be like working with Darth Vader, "Pray that I don't alter the deal any further..." and those companies will have no recourse. Once all the equipment is over there it is not like they can just pick up their toys and leave. More than likely they will steal the technology, add tariffs, change the lease agreements and in general screw them over until they come to the same conclusion as Google, it just ain't worth it.
War (Score:3, Interesting)
China has taken $trillions in activity from the American economy.
It's as if there was a war, and the U.S. lost, and China won, without one person dying.
Except it wasn't a war so much as a preemptive capitulation by people with something to gain from committing treason on an epic scale.
I wonder if they still get a tax break? (Score:3, Interesting)
The NY Times reports that American companies like Applied Materials are moving their research facilities and engineers to China as the country develops a high-tech economy that increasingly competes directly with the United States.
I wonder if those companies are still getting tax breaks to move jobs overseas?
Re:But (Score:4, Interesting)
Yup - and so ends another empire.
Anyone who hasn't seen this coming to the US for 20 years is a completely idiot. I keep telling people that globalization leads to a flatter market. The problem is that even distribution of wealth means that the 3rd world improves a little and the 1st world declines a LOT.
There's plenty of good quotes about it - this is hardly new. It's been going on for at least a hundred years (and 20 or more right here in the US).
Not surprising (Score:2, Interesting)
Re:Good job: Buying your future (Score:3, Interesting)
But to do this, you have to be looking at the long term numbers. China obviously did the math and looked at the projections out 100+ years on some of these moves (75year lease is in this example).
Applied Materials has always looked to Asia (Score:5, Interesting)
Back in the late 80s, Applied Materials thought of Japan as the new technology epicenter, and their chairman ordered hiring managers to bring in as many Japanese speakers as possible. They even moved their HQ to Japan. I learned all this from a job fair presentation and subsequent articles about them in the tech press at the time. Clearly, Applied Materials now considers China the new epicenter.
However, AMAT is just one company and does not necessarily represent a trend; they are just a company that is particularly focused on Asia. Significant technology R&D still happens in the U.S., notably around MIT and the Research Triangle in the east, Silicon Valley in the west, and various pockets elsewhere around the country (Seattle, Atlanta--anywhere there are clusters of universities and tech companies).
Obviously, China is going to either buy or grow the talent it needs to expand technology domestically. There is a trend for top Chinese scientists trained in the U.S. to relocate back to China to help their own country develop, or at least to land a more prestigious position more quickly than in the West. It's only a matter of time before China, like Japan before it, becomes self-sufficient in technology and starts to really contribute its own inventions rather than simply copying or building on others.
The way for America (and other countries) to compete is simply to make our country as competitive an environment as possible. Make small business loans as available as possible, and otherwise stay out of the way and let businesses incubate. We Americans tend to take business for granted, but like the flowers and grass in the yard, you have to pay attention or the plants you need and want will be overrun by weeds, or die from lack of water or fertilization.
Like the other Asian players, the Chinese get this. Ever since Deng Xiaoping and the 4 Modernizations movement, business has been seen as the engine of growth and prosperity. We Americans would do well to learn from their example and get back to basics. We have a goose that lays golden eggs; let's feed it, not kill it. I would begin by upping civilian research, allowing more tax incentives for corporate R&D, and maybe push more math and science education down to the high school level.
Re:Good news if it results in less regulation (Score:1, Interesting)
Your lame attempt at humor does not change the fact that every environmental "review" my company has to do before building a new factory pushes us closer to simply moving that factory overseas. Same thing goes with being forced to provide health care, vacations, limiting hours worked, providing paid sick leave days and statutory holidays, etc. Americans need to decide between shunning the free market (aka, the status quo) and feeding their families.
Re:America has something better (Score:3, Interesting)
The parent is the best comment on Slashdot.
In the 1980s, most of India had just 1 TV channel whereas the metros had 2. We waited for the weekends for a movie, local language on Saturday and national language (Hindi) on Sunday. TV programs actually stopped at night and started in the morning. There were no soap operas in this country which everyone glued their eyes to for 2 hours come 7 PM. There was no public internet. People spent plenty of time time talking with their family and friends, reading, going out on walks, playing cricket outside with others in the colony and worked normal hours without tension.
Today, you wake up and even before the toothpaste has dissolved in your mouth, you have logged into Facebook. Every person is on an island most of the time. Pretty much all of the stuff above has changed for the worse.
Exit costs & GFW (Score:3, Interesting)
China imposes huge exit costs on business. It's easy to get in, but you stand to lose a ton to get out. I think a lot of people make the mistake of thinking China is just another country like France or Burkina Faso. It's not. Foreign ownership of anything is restricted, and even if you're properly registered you will always be audited more carefully than any comparable Chinese company. These guys are going to go in to China, set up these huge research plants, and then be driven out Google-style. I mean, come on, China broke into google.com and left their fingerprints everywhere and "China rules!" spraypainted all over the windows. What kind of contempt do you have to have to even do something like that? To Chinese, foreigners are like women workers during WWII: temporarily useful.
Oh, and I hope that they enjoy doing their research behind the Great Firewall of China (Golden Shield). I hear someone saying VPN? VPNs were blocked from Xinjiang for several months following the riots, so the technical capability to block VPNs is there, to be activated if it is in China's interest to do so.
Re:Good job: Buying your future (Score:4, Interesting)
I hear what you are saying but I don't think it works. The REALLY big innovations rarely ever get done at some big behemoth company (sure there are exceptions like PARC and Bell Labs.) Most of the time the next huge thing comes from some guy starting his OWN company. Let's not forget that Europe saw the US dominance in computers and tried their own big government subsidies and it did very little to stop Intel, Microsoft, etc.
If you really want to look long term, then you have the best universities (the US is still far and away at the top here) and provide basic funding for university research.
Re:Good news if it results in less regulation (Score:5, Interesting)
Then starting in the mid-to-late 70s the Japanese started selling things in the US directly under their own brands and thus cutting the American CEOs out of the loop. It was only then that the politicians started really crying "they took our jobs!" and the supposedly "free-trade" Reagan(one of our worst presidents ever, I have no idea why people lionize the B-actor) made Japan make some major trade concessions and forced them to strengthen their currency.
So far China hasn't really made a big push in the west with their own brands, but its really only a matter of time. Then and only then, when the rich, who own the politicians lock stock and barrel, suffer will the politicians even attempt to do anything about Chinese trade practices.
"free traders" (Score:3, Interesting)
I find that terms such as free trade, capitalism, etc., are thrown around a bit too loosely. Most of the strongest proponents of free trade warned long ago that developing nations will overtake the U.S. Milton Friedman said that a foreign worker can learn the job of any American worker. Peter Schiff goes into great detail in his books to explain how the trade deficit is basically the annual amount of American wealth transferred overseas every year. The 'free marketers' you are referring to are likely neocons who spew all kinds of drivel to gain popular support of conservatives.
America already is in the service industry. A Chinese factory I do sales and marketing for purchased another factory that made a similar product, but a much newer technology that is used in common electronic devices (the old products were for automobiles). When I began selling these newer products I discovered that there are pretty much zero consumer electronics companies that use this component that even do their engineering in the U.S. This was a huge wake up call when I realized that most of the companies in the U.S. only do sales, marketing, and distribution - that's a very scary position for a nation to be in.
The cause of the employment problem is that we have too many federal regulations on employment and not enough legal immigrants [reason.org][pdf]. Forcing employers to pay their workers at higher rates than employers in other countries just makes the employer uncompetitive in the marketplace, thus sending the production overseas, and in many cases the rest of the company goes with it. Charging a high tax rate to pay for entitlements such as Social Security and high income taxes makes the employees even more expensive. On top of that, there are federal requirements on unemployment insurance and worker's compensation insurance, plus a tax code labyrinth of epic proportions. The reality is that when we put these requirements onto the employers, we lose the employers, thus in an effort to guarantee worker safety, the worker loses the job.
America will likely continue its transition into a 3rd world nation with very serious inflation and very high unemployment rates unless something changes dramatically, but it is not the fault of the corporations. Blaming a corporation makes as much sense as blaming a building. The issue is not with the corporations, but rather with the control that Washington D.C. exercises over our economy. If we eliminate the central control, then we would recover from this death roll and return to prosperity.
Also, I should point out that the statement "corporations have essentially dismantled US tech and manufacturing, which, for most of America's history, have been the backbone of this country" makes no sense because that backbone was corporations, so you are claiming that they are the backbone of our success and the cause of our failure, which makes no sense and is not true.
Re:Good job (Score:3, Interesting)
Let's see what happens when all these smart people doing the research start figuring out that living and working in Mumbai or Shanghai doesn't offer the same "perks" as living in the Bay Area of California.
You can't do research 24 hours a day, after all.
Even with the jobs fleeing the US, young people still want to come here.
Re:America the new 3rd World (Score:1, Interesting)
1. You don't know what third-world means.
2. Replace "China" with "Japan" and you have exactly what idiots like you were saying twenty years ago.
Re:Good job (Score:2, Interesting)
Problem being, and this is as a contractor that has dealt with both, I'd rather take the Americans in the US for US projects. I'm sorry, but what passes for learning programming in India is a joke. I literally invoked a clause in my contract that gave me a 1 year extension after proving (demonstrably) that the Indian team was making the US team not only do their own work, but fix the Indian work this idiot company hired. I'm not alone in having had to deal with this either. One of my friends worked as a SysAdmin at KC, and they outsourced a bunch of servers. Shortly thereafter, they were pulled back and the contract terminated because of pi$$ poor performance.
H1-B? Well, Joe Citizen's education was too expensive, because it was in the US, just replace him! Contrary to popular belief, H1-B's are not hired very often for jobs with a real lack of applicants. Go look up on the companies that consult how to ensure you get an H1-B. They made videos of their presentations on how to shut out qualified US applicants to jobs.
This situation, however, is more about bad US energy policy. Big companies get billions, but the actual research houses get squat. The US has a very skewed energy policy because of large business and hippies. There's very little actual science behind it, and it's almost always pork that leads to the awards.
Re:But (Score:0, Interesting)
But much of "wealth" is not finite, it is a matter of how much of it is being produced for larger parts. The 3rd world was extremely unproductive with all this exploitation. If the exploitation ends or becomes less efficient, it can very well be that more nations like china will be well capable of increasing their productivity by magnitudes.
Yes, raw materials and other things may become more expensive if that happens, but I believe this can be quite well offset by not wasting quite as much anymore. For other things, you'll have more productive partners to trade with in the former third world. This will also help OUR productivity. And in the not even so long run, we're looking at the possibility of having all our basic needs covered with near zero work effort, anyways (computers FTW), so all we'll be working for is going to be pure luxury anyways.
The only thing I myself am really worried about is that some nation(s) might invest most of their gained productivity in weapons of war, just because it appears there's a shortcut to more wealth.
Let a 50 year old Engineer tell you something (Score:5, Interesting)
By Engineer I mean mechanical, probably one of the last to have had (survived / endured) the old style apprenticeship, which is another point that won't mean anything to those younger than me, but is in fact vastly relevant to overall ability and knowledge.
For every technology that I have seen, the following is true.
1,000 guys actually manufacturing a product commercially using "x" technology push the field more in one year than 1,000 guys working in R&D do in 10 years.
Yeah, there is a bit of chicken and egg there, but the fact is that it is only when you start to make the product commercially, not prototypes, that you really learn about and master the technology.
The old engineering adage is "you have to build one, to build one".
A classic example for the US audience is the Saturn V, that was the pinnacle of 20 years of PRODUCTION effort from a team that arguably started with Von Braun's flying prototype bombs.
Even with CAD / CAM / CAE / CNC / etc, none of which we had back then, I sincerely doubt the US could build one today that actually flew to spec.
The Japanese basically fucked the British bike industry by starting out on PRODUCTION for a generation, before they were capable of designing anything even equal to what we had, not because they were stupid of rubbish engineers, but because it takes production experience to master anything.
Then the Japanese basically fucked the British car industry, exactly the same way.
Television sets? Ditto.
And the beat goes on.
You all have it 180 degrees out, worrying about R&D and IP and all that crap being outsourced, when you outsource production you are eating your own seed grain, doom is inevitable.
The next generation is based on the apprentice of today, and by far the best apprenticeship is one served in a production environment.
Mod me down as much as you like, I've got karma to burn.
Re:But (Score:3, Interesting)
I guess the last region to be exploited is Africa. Is it already too late to start buying land?
Land ownership in many African countries is not well respected by the governments. For instance, in Ethiopia most farmers don't own their land, the government does.
Someone I know was running a surface gold mine in a West African country which was expropriated by the government, so he left.
A large corporation could probably bribe an African government into purchasing land, and then keep bribing them to keep it.
Re:Good news if it results in less regulation (Score:1, Interesting)
The elite in this country have a self of entitlement over everyone else. Look at Meg Whitman. She wants 500,000 new cheap H-1Bs each year. She thinks that the California governor race has a "buy it now" price.
Re:But (Score:1, Interesting)
The problem is that even distribution of wealth means that the 3rd world improves a little and the 1st world declines a LOT
B.S. We had the means of production, just because we have free markets does not mean that as the rest of the world grows its own means of production that we somehow suffer. Given unchanging means of production, our standard of living would not change one bit. Economics is not a zero sum game, as you make it out to be.
The problem is that the U.S. government and the unions are cannibalizing our capital and forcing the capital investment overseas.
Re:Western and Eastern educations are not equivale (Score:4, Interesting)
Interesting. I never thought of it that way.
I managed a group that was heavily indian years back, mostly here on visas, whle the client did a more formal search for a CTO. I wasn't all that impressed with their skills. The two lead programmers, one indian and one russian, did 90% of the work, while the rest had a hard time finishing simple development tasks.
What struck me was the inability to understand a problem unless it had been broken down into formal requirements. They didn't understand anything about business needs, users needs, interface considerations, or work flow. They just knew how translate what was essentially pseudo-code into actual code.
I didn't ask them about this directly, but in talking about what education they did have, the colleges they went to only gave them classes in their main topic of study. They didn't balance things out with other mandatory classes in other areas.
It kind of gave me more of an appreciation for the liberals arts side of my degrees.
Re:This is significant. (Score:3, Interesting)
There are some good Chinese chip design houses. Although they're not yet up to doing a state of the art superscalar CPU, they can do most smaller parts.
I'm a US-born, US-educated chip designer working in China, and you are spot-on. Design and manufacturing (SMIC [smics.com]) are accelerating very quickly. 10 years ago, there was nothing. 5 years ago, there were startups. Today, there are Chinese companies putting out good chips, as well as respected US companies opening design offices here.
Re:Let a 50 year old Engineer tell you something (Score:1, Interesting)
Your point is proven by the Soviet experience. Russia had excellent accomplishments in research and theory, but were behind in manufacturing. Denied access to western production experience, which was historically more advanced, they were unable to catch up, which resulted in the Soviets losing the cold war.
The U.S. transfered its production experience and technology to Asia and gave away its historical lead. Our ability to do research is ecoomically as irrelevant as was the Soviet's ability, because the ideas grounded in reality come from experience in production. You can look at an iPod all you want, but the relevant thing is to look at the factory that can produce an iPod. Even more important is the factory that can produce the tools used in the factory that produces the iPod, and this is the role that Applied Materials plays.
"Free Trade" policy at the government level, by which is meant massive trade deficit policy and the abandonment of manufacturing, leaves individual companies no choice over the long run but to follow the exodus to those countries, like China, Japan, and Germany, whose governments value manufacturing. They believe that "the wealth of nations" comes from the ability to produce, rather than froom the ability to consume.
The ability to produce comes from the practice of production, and the interest in effective research comes from being faced with the problems of production. Companies like Apple and Applied Materials are no longer relevant to the U.S. economy because everything they produce goes to improve production in China, not in America, and as a result their operations will gradually move to the economy in which their work is most directly applied. First, of course, they may import tens of thouands of employees from those economies, a step which they have already taken. Moving the rest of their operations will happen over time, or in the case of Applied Materials, now.
Re:Let a 50 year old Engineer tell you something (Score:3, Interesting)
Another 50ish ME here.
I worked for Applied Materials when it was busy outsourcing production of 5000 and Centura systems to Japan, in the early 1990s. At that time Silicon Valley was getting full of Japanese companies doing exactly what we're talking about here: buying, cross-licensing, or otherwise co-opting technology. There was - and still is - an AMAT R&D center in Narita where the biggest, nastiest kludge prototypes were being built by local staff. And they learned, and they got better at it....
and the market moved. AMAT is now seeking growth in solar films, not in what was their core business: wafer fab.
AMAT is probably smart enough to keep the cutting-edge tech nuggets the hell out of China. The parent is right about production raising the ante. The parent is wrong in implying that this ipso facto ruins the home business - it only ruins businesses that have gotten complacent. UK car industry? Failed to be paranoid. Ditto UK bicycle industry, American audio industry, American car industry. The American aircraft industry is next and I assure you Boeing are not missing the implications. 757 production -will- be moved to China in ten years or fewer. How will the market move in aircraft?
After all, the UK, France and Germany are still in business. So is the US.
In my current business, labor is a pretty small fraction of the cost of goods sold. As it matures, it will get more cost sensitive and the gains to be had in reducing labor cost will mean this business will move to China.
The question is whether the fuse is built faster than it burns.
Don't discount, above all, the idea that the Chinese are managing their own fuse. If 1.3 billion people demand more than what can be supplied, there you have the necessary conditions for a revolution: they're not started by starving people, they're started by people who see progress but aren't sufficiently sharing in it.
Re:Good job (Score:1, Interesting)
There is no extremely easy immigration for skilled workers to the US based on employment anymore. It works on ridiculous country-of-birth (not citizenship) based quota systems that exist to promote "diversity," instead of focusing on skill alone. The US could have avoided by a large margin some of the problems with outsourcing and China becoming better at high tech by simply making sure that the brain drain continues. It is just laughable that there are no easier paths to US immigration and citizenship for US-educated Chinese and Indian people. They spend years here, learning under the best, and are then sent back by a system that is set up to discourage highly skilled talent from staying.
Re:Western and Eastern educations are not equivale (Score:3, Interesting)
Unfortunately, we are not talking of Indian and US education. We are talking of US educated PhDs in India. They cant get Green cards or H1Bs easily in such a climate - so they go back.
Lets see - the average number of caucasians in any science or technology PhD program is low - most are asians. So I guess they have the critical skills to ace the US education system without their 'critical skills'.
So lets see some of the key things you point out: 1. Software development fails due to lack of critical thinking amongst Indians - so lets see MSFT projects routinely used to fail when indians were almost rare on msft campus. Cant blame that on Indians. Software projects in general fail quite a bit not because of programming but due to lack of project management skills.
You cant compare the average programmer who comes here to do crappy ERP consulting or Java programming with 'innovative researchers' here in the US.
2. Anyways lets see - what does the average Slashdot reader do ? programming for businesses to process orders ? sell stuff on the web ? How many are actually doing anything innovative ?
Will your CIO miss you if the HTML/JS/java stuff you are doing is done by some other dork in another part of the world ? I dont think so - esp. if it is done at 1/3rd the price and with limited benefits and 6 day work weeks.
For those of you who are truly 'innovative' - there is nothing to fear.
3. 40% of NASA/MSFT/GOOG etc. are asians (chinese + indians + koreans etc.) - now remember these are from the small population of the students who happen to be chinese and indians. So I guess these chinese and indians are not 'critical thinking' challenged.
4. Superiority complex is unfortunately akin to shooting yourself in the foot. You may think you are the critical thinkers and the innovators - but remember, indians/chinese and most 3rd world people are much hungrier for success. This is the windows vs Apple model. Apple may have been cooler - but Windows takes over by sheer numbers.
2 billion to 350 million. You would need to be 3-4 times as innovative as the rest of the world to survive :) - that is assuming like 800 million of the Chindia population is a complete waste. The reason India and China did not have much to show in patents was cos they cost $3-$4k even in small countries. Now the patents from Indian research labs are piling up!
Bye bye average American programmer!
Take a small dose of reality between the differing cultures. It's called Peer Pressure. In the United States it is highly frowned upon one becoming the ``professional student'' and best to get your degree then go to work and have the corporation pay for your advanced education. Unfortunately, most corporations have stopped that practice and want you to have that advanced education beforehand. If US Families would encourage their kids to get advanced degrees and cultivate this like we once did, we wouldn't have this perceived brain drain.
More importantly, what is with the Computer Science analogies. It's my second field, but it's not the field this article is centered around. The field(s) are Material Science Engineering, Electrical Engineering, Mechanical Engineering, Chemistry and Physics.
Re:Let a 50 year old Engineer tell you something (Score:0, Interesting)
my karma is shit and has been since it was ruined in some attack (that even slashdot admins could not figure out). there goes my 10+ yrs of karma. so, I have NO karma left at this point to ruin (if you can even see my -1/starting post).
I'm also in the 50yr old range and also an engineer. I hear you loud and clear! however, the guys running the show don't hear us or simply refuse to care. half of them don't know any better and the worse part is, the other half DO!
our 'manufacturing' is now 'do you want fries with that?'.
people our age have seen the passing of an era. problem is, you and I are not ready to retire yet; but the field is more than willing to sell our jobs out.
good luck to both of us.