And you engineers watch your back, there are 700,000 Chinese folks that want your job:
SmartMoney.com
All the T in China
Thursday October 10, 1:48 pm ET
By Russ Mitchell
This article was originally published on SmartMoney Select on 10/03/02.
GET READY FOR THE CHINACOSM.
The 1980s was the decade of the Microcosm, when rapid advancements in microprocessor technology propelled the U.S. economy. The 1990s was the decade of the Telecosm, when high-speed fiber-optic communication channels lit up markets around the world.
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Now, says techno-visionary George Gilder, the world had better brace itself as a fast-rising China detonates its booster engines and quickly emerges as a technological powerhouse, with deep and serious implications for the U.S. and world economies. Here's just one startling statistic offered up by Gilder: China turns out 700,000 new engineers every year. The U.S.? 65,000.
So what? you might ask. Everyone knows China is growing fast. And why listen to George Gilder? The author, speaker and publisher of the Gilder Technology Report rode high on his own Telecosm hype through the 1990s, say many critics, only to see his reputation crash and burn with the technology and telecommunications industries. Anyone who bought heavy into the stocks listed in his newsletter the past few years — think JDS Uniphase (NASDAQ:JDSU - News) — surely regrets it. Is money a particle or a wave? Who cares, if it's gone already.
But Gilder is no businessman or stock tout, and to dismiss his ideas because the high-tech economy right now is running through heavy turbulence is to miss the big picture entirely. When Gilder wrote the papers and gave the speeches in the 1980s that eventually were collected in the 1989 book "Microcosm," his predictions about fundamental social, cultural and economic changes brought by the computer chip were way ahead of the pack. Same thing when he started talking about high-speed broadband communications networks — the Telecosm — in the early 1990s, when hardly anyone had ever heard of the Internet. So there were some screw-ups along the way. Does anyone really doubt that continually evolving computers and communications systems will continue to rock the economic future?
Gilder hasn't used the word "Chinacosm" yet, but it's clear that he sees China's economic influence quickly shifting from future threat to present reality, and with an influence so tremendous that the choice of the U.S. to embrace China or to fear it holds serious implications for our own economic prosperity.
Stepping off the plane from China and driving straight to a mountain resort in California's Sierra Nevada range earlier this week for his annual Telecosm conference, Gilder laid out his China vision. He, along with Nick Tredennick, editor of another Gilder newsletter, Dynamic Silicon, offered some remarkable comments:
China is poised to take over the world's manufacturing. Some 18 million people enter the work force each year. Typical wages are 60 cents a day. Even Mexico is losing jobs to China. Individuals outside of China will be displaced on a large scale.
The notion that Chinese workers will begin replacing physical laborers elsewhere has long been a given. But the country is poised to replace the world's mental workers as well. Remember: 700,000 engineers a year, 37% of all college graduates — all trained in a university system that is rapidly growing in size and quality.
Engineer pay ranges from $4,800 to $8,800 a year, plus medical costs, housing and pension. As product design becomes more network-centric and less location-dependent, the competition for Western engineers will turn even tougher.
Despite these remarkable statistics, however, Gilder was most impressed with the high-pitched level of capitalistic energy he found in China on his first trip there since 1985. Ever the optimist, he sees opportunity for the U.S. Typically unable to restrain his enthusiasm, Gilder launched into high animation when he described China as "in fact the greatest opportunity in the history of capitalism." As if that weren't enough, he heaped great praise on Communist Party chief Jiang Zemin. "In Washington, Jiang is considered a dangerous Communist," Gilder said. But no. "Jiang is the single greatest capitalist leader of the postwar generation."
Hmmm.
How can the U.S. capitalize on China's rise? Do what China can't do. Stop protecting loser industries like textiles and steel. Re-up the commitment to advanced technology. Embrace immigration, rather than chase it away. Tredennick noted that huge numbers of Chinese engineers, upon graduation, learn their trade at companies in Taiwan, Singapore and the U.S. Rather than use the temporary H-1B visa system to limit immigrant labor, why not open up the gates, and lure the best and brightest around the world to work right here?
One of the biggest things the U.S. government can do right now is to stop looking at China as an enemy, Gilder says. It's ridiculous to restrict exports of technology China can easily find elsewhere. And concern for human rights should not restrict commerce. Quite the opposite. There's a lot of this "ugly phenomenon" in China, as Gilder puts it, but he's convinced that increasing levels of education and prosperity will encourage democracy and respect for the individual. Growing economies make life better for poor people.
Indeed, China is growing so rapidly that there will be plenty of opportunity for exporters of high-value goods, as well as for direct foreign investment for many years. Although it's investing heavily in semiconductor plants, Gilder says China currently imports 90% of its computer chips and will still be importing 70% five to 10 years from now.
Gilder's view of China, I think, is too rosy. But to me there's no question China's influence on the U.S. tech economy will start hitting with great force over the next several years. Companies need to seek out the opportunities China's growth offers. The U.S. government needs to let them. As Gilder put it: "Let 10 billion flowers bloom."
For what it's worth, Gilder's Dynamic Silicon newsletter likes the following companies as plays on China:
Opportunities: Excellent
Contract manufacturer Flextronics International (NASDAQ:FLEX - News; Singapore)
Chip foundries Taiwan Semiconductor Manufacturing (NYSE:TSM - News) and United Microelectronics (NYSE:UMC - News; Taiwan)
Opportunities: Good
Chip foundry Chartered Semiconductor Manufacturing (NASDAQ:CHRT - News; Singapore)
Dell Computer (NASDAQ:DELL - News), IBM (NYSE:IBM - News), Intel (NASDAQ:INTC - News), Motorola (NYSE:MOT - News), Texas Instruments (NYSE:TXN - News; US)
Russ Mitchell is a veteran technology journalist based in San Francisco.
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