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Population boom is industry boon

CNET's Michael Kanellos reports that global demographic forces are changing Silicon Valley in profound ways.

Why is the high-tech industry rushing to the Third World? The numbers tell it all.

The world's population grew faster than ever in the 20th century--going from 1.6 billion at the beginning to 6.1 billion at the end--with most of the increase occurring in the developing world, according to Joseph Chamie, director of the Population Division of the Department of Economic and Social Affairs at the United Nations.

As many people will be born in India in the next six days as will be born in all 15 European Union states and the soon-to-be EU states in an entire year, he said. India, in fact, is growing faster than China, Pakistan and Nigeria--the world's second, third and fourth fastest-growing nations--combined.

Larger populations mean more consumers, but can also mean a deeper pool of domestic intelligence and talent.

"Silicon Valley is basically a cork in a large tub, and the waves in that tub are demographic forces," Chamie said in a speech at Silicon Valley 4.0, a conference that took place earlier this week at the Computer History Museum in Mountain View, Calif.

The figures underscore that globalization is more than a passing buzzword.
Meanwhile, most Western nations are receding in size. Albania is the only European country experiencing a population increase, he said. By 2050, Italy will have a smaller population than it did than in 1950. In 1945, Europe accounted for 25 percent of the world's population. It's at 12 percent now and is expected to drop to 7 percent by 2050.

Canada is sustaining itself through immigration; the United States is growing, another beneficiary of immigration. Of the 2.4 million people who annually leave their country for another, half come to the States.

The figures underscore that globalization is more than a passing buzzword. In the past two years, a number of companies have transferred functions to India or Poland to save money. But it's only the beginning. Just as the United States went from an agricultural backwater in the 19th century to an industrial giant in the 20th century, many developing nations will emerge as sophisticated world powers.

Everyone is trying to adjust to this new world, but it won't be easy.

For one thing, companies will have to make their products much less expensive. The average tech consumer today is a middle- to upper-middle class family tooling around in an SUV. In the future, the target audience could be the person repairing motor scooters with a blowtorch, working out of a sidewalk stall in Surabaya.

Some companies are already moving in this direction. Intel, which already pulls about 70 percent of its revenue from outside North America, recently said it is considering creating cheap chips for PCs for the Third World. Advanced Micro Devices has already re-released its cheap Duron processor in China.

Western companies will also have to rethink their roles. The United States once dominated the information technology market. But with a

Intel recently said it is considering creating cheap chips for PCs for the Third World.
greater number of engineers graduating elsewhere in the world, companies will have to begin to concentrate on more difficult challenges while leaving product design and other tasks to emerging nations, according to Geoffrey Moore, a partner at venture capital firm Mohr, Davidow Ventures. The first-mover advantage will shrink.

"There is going to be an emigration of American technology into China. It will increase innovation in China," added Irwin Federman, a partner at US Venture Partners. "That didn't happen with Korea and Japan."

In addition, Western nations and companies will have to monitor the pace of change and pay closer attention to public opinion. The backlash against sending functions offshore will likely increase, said Moore.

At the same time, Chamie noted, poverty in developing nations could unleash even greater problems. "You need a stable world for trade," he said. "If you don't take care of developing countries, they will come after you."

Nonetheless, the opportunity is there. The world's population is expected to grow from 6.1 billion now to around 9 billion by 2050. It's a huge increase. But so far human civilization has shown it can absorb large surges in population while improving the overall quality of life. Think about it. There were a lot less people 1,000 years ago, but your condo is probably a heck of a lot cleaner than the hull of a Viking ship.

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Senior department editor Michael Kanellos scrutinizes the hardware industry in a weekly column that ranges from chips to servers and other critical business systems. Enterprise Hardware every Wednesday.

And what will these 9 billion people want? High tech will be in demand: Computers, unlike clothes, are one of the few household products that can lead to economic advancement.

But other markets will get hot, too. Chamie noted that the average lifespan will continue to lengthen. Those who become "hour millionaires" by living 114 years will become more common, and they will want products. "So it's hair coloring, comfortable shoes and Pampers for adults," he said.