To: age discrimination/H-1B/L-1 e-newsletter Andy Grove, "Mr. Intel," gave a deliberately provocative speech yesterday, as reported below in the Post article. According to Grove, the U.S. is in danger of losing its world tech dominance. That of course is no surprise to readers of this e-newsletter, but they will find the following passage of major interest. But Grove acknowledged under questioning that the tech industry itself is responsible for numerous jobs leaving the United States, as firms take advantage of considerably cheaper labor costs in India and elsewhere. Unfortunately, that comment did not include the importation from India of engineers and programmers as cheap labor in the U.S., but the point is the same. Grove said he is torn between his responsibility to shareholders to cut costs and improve profits, and to U.S. workers who helped build the nation's technology industry but who are now being replaced by cheaper labor. Grove did not offer a solution, saying only that the government needs to help decide the proper balance between the two. Otherwise, he said, companies will revert to their obligation to increasing shareholder value. The fact is that the savings Intel accrues from cheap foreign labor (whether here or abroad) form a minuscule percentage of Intel's overall profits. Recent estimates from financial consulting firms paint a stark picture of "offshoring," which allows companies to get software development and other services at one-third to one-sixth the cost. Actually, the amount savings is typically around 30%--substantial, yes, but not nearly as large as stated above, and not nearly enough to compensate for the problems encountered. I am also including below a longer article from Forbes Magazine, about which I have the following comments: "More than 50% of graduate students are foreign nationals," says Grove, who says the U.S. needs to attract foreign talent "with appropriate immigration policies." Grove himself emigrated from Hungary in 1957 and went on to co-found Intel in the late 1960s.* I've written at length on this before, so I will simply summarize my comments: (a) Most of the H-1Bs hired by Intel do NOT have graduate degrees. (b) As the National Research Council pointed out, it simply doesn't pay for American students to pursue graduate study. By forgoing industry pay during five or six years of study for a PhD, they start out their careers in a financial hole that they never recover from. If Intel sincerely wants more PhDs (see (a) above), it should be lobbying the government to make it financially attractive to American students, by raising the stipends in graduate assistantships to attractive levels. Norm http://www.washingtonpost.com/ac2/wp-dyn/A6042-2003Oct9?language=printer Intel Chairman Says U.S. Is Losing Edge By Jonathan Krim Washington Post Friday, October 10, 2003; Page E01 One of the founding fathers of the nation's high-technology industry warned in dire terms yesterday that U.S. dominance in key tech sectors is in jeopardy, threatening the country's economic recovery and growth. Speaking via satellite to a global technology summit in Washington, Intel Corp. co-founder and chairman Andrew S. Grove said that the software and technology service businesses are under siege by countries taking advantage of cheap labor costs and strong incentives for new financial investment. "I'm here to be the skunk at your garden party," Grove said, noting wryly that his remarks coincidentally fell on the same day as one devoted to promoting nationwide screening for depression. Grove, 67, singled out China and India as key threats. India's booming software industry, which is increasingly doing work for U.S. companies, could surpass the United States in software and tech-service jobs by 2010, he said. More ominously, Grove said, the software and services industries -- strong drivers of U.S. economic growth for nearly two decades -- show signs of emulating the struggles of the U.S. steel and semiconductor industries. In the case of steel, U.S. companies never recovered, dropping from nearly 90 percent of worldwide market share to roughly 10 percent. The semiconductor industry, Intel's core business, faced similar challenges in the 1980s, when it began its drop from 90 percent to 40 percent of the world market, Grove said, before aggressive trade and other U.S. policies helped it recover and stabilize at about 50 percent. Grove said that even as the U.S. economy is improving, tech employment is not. According to industry figures, more than 500,000 technology jobs were lost from mid-2001 to mid-2003. Many of these were due to a contraction of the tech sector after the dot-com bubble burst in 2000. But Grove acknowledged under questioning that the tech industry itself is responsible for numerous jobs leaving the United States, as firms take advantage of considerably cheaper labor costs in India and elsewhere. Grove said he is torn between his responsibility to shareholders to cut costs and improve profits, and to U.S. workers who helped build the nation's technology industry but who are now being replaced by cheaper labor. Grove did not offer a solution, saying only that the government needs to help decide the proper balance between the two. Otherwise, he said, companies will revert to their obligation to increasing shareholder value. Recent estimates from financial consulting firms paint a stark picture of "offshoring," which allows companies to get software development and other services at one-third to one-sixth the cost. The Gartner Group, a market research firm, estimates that 10 percent of jobs at U.S. information technology vendors will move offshore by next year. Throughout all U.S. companies, Forrester Research predicts the loss of roughly 3.3 million jobs by 2015. Grove said that the move offshore has been aided by the telecommunications bubble of the late 1990s. So much infrastructure for high-speed Internet connections was laid, much of it never used, that the cost of achieving high-speed communication plummeted. As a result, Grove said, "the engineer sitting 6,000 miles away might as well be in the next cubicle." Grove chided U.S. policymakers for all but ignoring the problem. "What is the U.S. public policy?" he asked. "I am hard put to find a document" outlining a policy strategy. He said he had detected no recognition of the problem from any of the presidential candidates. Grove also criticized the nation's overburdened patent system, which he said is causing an abundance of innovation-slowing litigation. He said that the inability of patent examiners to handle the workload has led to a backlog of important applications, but also less than thorough vetting of patents that perhaps should not be granted. Grove also said the country lags dangerously behind in popular use of high-speed Internet connections, funding for science and technology research, and education. © 2003 The Washington Post Company http://www.forbes.com/2003/10/10/cx_ld_1010andy.html?partner=yahoo&referrer= Grove: Competitive Crisis Looms In U.S. Lisa DiCarlo, 10.10.03, 9:28 AM ET WASHINGTON, D.C. - Andrew Grove is depressed. The chairman of Intel (nasdaq: INTC - news - people ) says that the United States is facing a competitive crisis that puts the country is danger of losing its lead as the world's most innovative technology "I'm here to be the skunk at your garden party," Grove told a group of about 150 beltway types gathered here for the Global Tech Forum, hosted by lobbying group Business Software Alliance. Why is the U.S. waning? Grove says it's because of offshore outsourcing, lack of federal support of sciences education and a "ho-hum" telecommunications infrastructure. "We've lost more than 500,000 tech jobs in the last two years to foreign competitors." Indeed, many U.S.-based companies are either thinking about or have already sent white-collar jobs outside the country. Companies can often cut costs and boost productivity dramatically by hiring skilled labor in India and other countries. Much of that work lately has involved software development and professional services. It is this area where Grove fears the U.S. will lose technical leadership and market share. As proof, he said that the U.S. market share for steel and semiconductors has dropped precipitously over the years. "Is software and services next? It's a very valid question and it would be a miracle if it didn't happen," Grove said. To pull off the miracle Grove is going to need help, and he knows it. "We must fight protectionism here and abroad, double our productivity and raise the hurdles for intellectual property litigation. We must rally around this goal." That might be tough, given that companies aren't ignoring the cost benefits of going offshore. In a morning session at the conference, the chief executive of Internet Security Systems (nasdaq: ISSX - news - people ), Thomas Noonan, expressed what could be a widely held belief: "[Offshore outsourcing] is a train we've got to get on and drive or it's going to run over us." How can the industry rally against offshore outsourcing of jobs when there is such a difference of opinion? Grove says he's been there before, particularly in the 1980s when American semiconductor companies were getting the tar kicked out of them by the Japanese. "This is a democracy. Debate is good." Grove is also depressed about the state of sciences education in the U.S., which could eventually put the country in the position of relying on others for innovation. "More than 50% of graduate students are foreign nationals," says Grove, who says the U.S. needs to attract foreign talent "with appropriate immigration policies." Grove himself emigrated from Hungary in 1957 and went on to co-found Intel in the late 1960s.* Carol Bartz, chairman and chief executive of Autodesk (nadsaq: ADSK - news - people ), made the point that many foreign students who earn science degrees in the U.S. end up returning to their countries, taking their expertise with them. Grove says that the U.S. government should invest more to attract and retain talented students. After all, the U.S., he points out, has committed more than $60 billion in subsidies and aid to farmers, oil and steel companies and airlines. "One billion a year [to promote science education] would help us reach this goal." Phillip Bond, undersecretary for technology at the U.S. Department of Commerce, in a brief interview, disagreed with Grove's gloomy outlook. "Education is one of the administration's top priorities [and] we are committed to bringing talent here." That may be true, but it's worth noting that one of the tasks of the Commerce Department's technology group is to study foreign competitors. That includes warning against advancing or surpassing U.S. capabilities, which could prompt some federal funding to relevel the playing field. One example: the U.S.-funded development of Cray (nasdaq: CRAY - news - people ) supercomputers several years ago, after Japanese companies built what was then the fastest, most advanced computer in the world. Grove says it's wrong to assume that low-skilled jobs being outsourced now won't eventually work their way upstream to more critical tasks. When that happens, the U.S. could lose its edge. The People's Republic of China, he said, had stated a goal in 2001 to produce more world-class engineers. "Do we have the national will to take productive action? When the problem becomes obvious, it will be too late--and the outcome will be too depressing, even for me." *An earlier verison of this story inaccurately stated that Grove had emigrated in the 1930s.