Tech, drugs and the wealth of nations
Cadence Design executive Ray Bingham says there's a precedent the U.S. can use to maintain its tech leadership.
Bingham, executive chairman of the chip-design software company, argues that Swiss and German companies have managed to remain dominant in the pharmaceutical and chemical fields by learning to "straddle and harness" global markets.
"If you look at the influence in relative ownership and wealth creation within those industries, you still find a disproportionate amount of it flowing back to Switzerland and Germany," Bingham said. "You still see significant research being done there, but over time it goes to where it needs to go from a talent, cost and market point of view. The same exact thing is happening in the electronics industry right now."
Bingham is the latest voice weighing in on a growing debate over how the United States can maintain its technological leadership in an age of offshore outsourcing and as developing countries such as China and
San Jose, Calif.-based Cadence is busy trying to harness those emerging powers. The 4,700-person company has its largest research-and-development operation in San Jose, but it has 700 research and development employees in India and another 100 in China.
CNET News.com recently spoke to Bingham about matters including R&D spending, China's advances in the semiconductor field, and how the United States can remain a top player in electronics.
Q: Where do you have R&D operations outside the United States?
Bingham: Our first efforts were in Japan and Taiwan, though they've never gotten very large. We followed on that with a fairly significant site in Sophia Antipolis in the south of France and one in Scotland and, of course, in the United Kingdom. So those have been the traditional sites we've had in place for a long time.
We also about 10 years ago started developing an R&D activity in India. We...have grown that steadily over the past 12 years to its present size of about 700 R&D people. It is in a site located just outside of Delhi.
How does that compare with your other R&D sites? Is that the biggest one you have now?
Bingham: Oh no, no. Our largest one by far is here, in San Jose.
How many people are there?
Bingham: We have 912. We have maybe 250 in the Boston area. We have on the order of 100 in North Carolina, and we probably have another 100 or 150 in Austin. There are some other small
How long has that been the case?
Bingham: Three years.
And where are they located?
Bingham: About half in Beijing and half in Shanghai.
Do you expect that China presence to be growing in the years to come--that China and perhaps India are likely to be the place where you're going to grow furthest in the R&D arena?
Bingham: Well, I would say that you can certainly expect to see sites like that and other developing-country sites continue to grow.
Do you have any formal plan or informal plan you can give publicly, especially in terms of headcount? What do you expect in China over the next five or 10 years?
Bingham: There's nothing that I'd be comfortable talking about, other than to say that the principle of putting your resources where the market is and where your customers are is not an option. That's something that you have to do in order to effectively serve the markets that we're competing in. So if the center of gravity of the semiconductor world and the electronics world is continuing to move to Asia and to other developing country centers, then you would expect to continue to see those sites grow with the market.
That raises this concern of the U.S. losing all of its technological leadership--not only in the manufacturing of semiconductors, but then the design work and, in your case, the know-how to make the tools for designing chips. How do you deal with that concern?
Bingham: I think that's a risk that we should care about as a nation. And it's entirely within our grasp to make sure that it doesn't happen.
What do we need to do to?
Bingham: I think several things. Let me spin an analogy for you. Once upon a time, most of the chemical engineering world--drugs and industrial chemicals--was dominated by labs and inventors and smart people that were coming out of Switzerland and Germany. If you look back at that history of the pharma industry and the chemicals industry, you'll find that that part of the world really dominated.
Over time, of course, those same companies and the industry proliferated around the world, and I think that's been a good thing for mankind. The winners (are) those that learned to straddle and harness those global markets. If you look at the influence in relative ownership and wealth creation within those industries, you still find a disproportionate amount of it flowing back to Switzerland and Germany. You don't see all the labs there. You still see significant research being done there, but over
time it goes to where it needs to go from a talent, cost and market point of view.The same exact thing is happening in the electronics industry right now. Open environments, open countries, lower barriers to commerce and to information is creating a global opportunity for electronics and anybody that (invests) in the education and the training and the R&D that it takes to be competitive.
So what do we need to do to make sure that we continue to be the leaders and not lose that capability? We need to make sure that Silicon Valley in this particular case, or the United States more broadly, continues to be a destination for anyone on the planet that wants to be involved in the industry. Why are we a destination? Well, because we have the best universities, because it's a good place to live, because we still have a very important market that drives a lot of the revenue. It's all the obvious things. We cannot hope to monopolize chip design and chip manufacturing the way we once did, but we can hope to continue to influence it on a global scale and leverage it on a global scale.
If we learn to play the global game and continue to make this the most important node where people come to work, to get experience, to get educated, some significant fraction of those who do that will want to stay here and live here and start their companies from here.
Does that mean, though, that there will be fewer jobs in Silicon Valley in the long term--just very good ones? Or do you see the number of jobs actually increasing over time in the region?
Bingham: The job opportunity profile will change over time as it has with every turn of the evolutionary wheel in technology. For example, in the IT world, it wasn't a few decades ago that the highest-paid technologists in software were writing Cobol. Now it's a global commodity that's dying out. Today the highest-paid technologists are writing C++ and playing with esoteric new languages that may or may not get attraction. But someday, that's going to be commoditized.
Can you make any kind of guess on the numbers, though?
Bingham: It just depends on how things get organized and what else is here.
I was just reading a study put out by a former Department of Defense official named Michael Pillsbury. He described reports that Taiwan Semiconductor Manufacturing Co. will open a design-service center in China, and that the country just got the second edition of its Godson chip, designed in a home-grown
fashion. (Godson II is said to be a 64-bit processor able to run at 500MHz.) I'm curious about whether or not these are signs that China is taking the reigns of the semiconductor industry--not just the manufacturing work, but its higher-level stuff.Bingham: No, I (view it as) an important milestone but not as a signal that China is taking the reins.
If you look at what TSMC is doing--and by the way, Fujitsu and NEC and Philips and LSI Logic and many, many other companies are doing the same thing--what they're doing is harnessing Chinese engineering talent to design devices in many cases for the Chinese market. (That) is one of the important reasons to put your design capability there, so that you're eligible to sell into that Chinese market opportunity but do the manufacturing in a TSMC or an NEC or an LSI manufacturing facility. Think of it as developing a funnel of business by offering design services to customers who happen to be in China.
What it does do, of course, is raise the level of capability in China--design capability, which currently lags quite a bit behind the developed world. TSMC and these other names that I mentioned...are learning to straddle or learning to command an increasingly open global world, and the customers happen to be in China in that example.
Are you talking about facilities that are going to churn out chips that end up going back to the U.S. or the European markets? Or are these chips ultimately for Chinese consumers? Or both?
Bingham: Both. China over the next five years will produce about a third, maybe as much as 40 percent, of the world's semiconductors, and the projections are that they will consume about half those themselves.
So in your view some of these recent advances in the Chinese semiconductor industry are not necessarily a sign of doom for the U.S. semiconductor industry and jobs in that industry?
Bingham: Not all. I think it's an enormous market opportunity for the electronics industry, and the strongest players on Earth in the electronics industry are in the United States.
Do you have feelings about the issue of R&D funding from the federal government? One argument is that we've been short-changing the IT arena.
Bingham: I don't think it's the biggest issue, but I think it's an important issue. Everyone needs to be investing. Every business, if it's looking at the horizon rather than the next quarter or the next year, needs to be making longer-term investments than most do. I can tell you that at Cadence, over the last five or six years, we're investing more heavily in R&D as a percentage of our size and a percentage of our revenue than we have ever in our history. Would I like to leverage that with federal dollars or state dollars? Sure I would. I think that'd be a good thing.
