Future Intel Xeons to be designed in India

[Neil Maxwell]

However salaries in India have floated up pretty dramatically these last
10-15 years, and will continue to do so (at least for the educated folks
.. and educated Indians are very educated indeed .. which other country
teaches '19 times table' in schools? Heck, which other country does most
of its teaching in what is, to 99% of the pupils, a second language?
8>.)

This is only a small portion of Indians, and is where they are going
to lose against China if they don't get their act together.

India overall is not educating the masses, which is what you need for
economic dominance like America or Japan has experienced in the past.
Literacy rates in India are running around 50% (with more illiterate
women than men). China, OTOH, is educating everyone, and is building
considerable momentum. They're like a sleepy giant starting on their
2nd cup of coffee. Watch out when they finish the pot!

Another difference is that India is building soft industries
(software, design, other stuff that can be moved relatively quickly
and cheaply), while China is focusing on hard industry - brick and
mortar manufacturing that pays back into the community for decades and
is not easily transported elsewhere. Manufacturing is the life-blood
of a vital national economy.

The size of the population will work to the advantage of both, though.
Korea was starting to be a threat with low cost manufacturing, but the
population is small enough that raising the standard of living a lot
(hence the cost of production) didn't take so much. Raising the
standard of living of a billion Chinese is a longer-term project...


Neil Maxwell - I don't speak for my employer

 

[Yousuf Khan]

Why stop at development/design? What prevents management from being
outsourced too? Heck, what prevents the board of directors from
outsourcing the CEO position?

That may very well be the next avenue of outsourcing. There was a time when
they said they'd never outsource their engineering and scientific brains,
but that's happening now. In recent years, upper management has been
displeasing shareholders (institutional and individual investors alike),
with things like Enron, Tyco, etc. The executive suite seems to believe that
it's outside the scrutiny of anybody, but it may not be anymore.

Let's face it, even the salaries of American executives are way above
anything the rest of the world sees. You can justify it by saying that
you're not really paying them a hell of a lot, except with stock options,
but even that gets old when they get so many stock options, they usually
become major shareholders of the companies they run without even buying a
single share.

Yousuf Khan

 

[Yousuf Khan]

The reduction in salaries will be partially balanced out by the
reduction in the cost of goods. If outsourcing reduces the labor
costs of goods, it will reduce the cost of those goods.

A reduction in the cost of goods is otherwise known as deflation. If there
is ever a recipe for a self-destructing economy, it is deflation, more so
than inflation. Deflation is like that proverbial airplane that has stalled
and is now spiralling down to earth, supremely difficult for a pilot to
control. The most staunchly anti-inflation central bankers tend to try to
keep at least a moderate amount of inflation going because deflation is
worse -- deflation could cause street riots as salaries get chopped, or
layoffs mount.

They could. I don't think it's likely, but it's certainly not
impossible. More laborers will be competing on an international market
rather than a national one.

I see salaries remaining stagnant more likely than salaries getting chopped.
Salaries getting chopped will bring the US in line with the rest of the
world more quickly, but at the risk of social upheaval. Just look at the
Soviets.

No, you have the cause and effect backwards. Prices will lower
for goods for the same reason they'll lower for wages -- competition
in a larger economy.

As you know, in the economy, cause and effect play off of each other.
There's no telling which is cause and which is effect most of the time.

No, sales won't tumble, they'll grow. Cheaper labor means cheaper
goods that poorer people can affort. Globalization means larger
markets to sell goods into.

Again, depends on which is cause and which is effect. If salaries are cut
before prices are cut, sales will decline.

You can, so long as the US worker's productivity corresponds to
his cost.

Productivity is difficult to measure when it comes to those "brainy" jobs.
How do you measure productivity in an engineer? Or worse yet, how do you
measure the productivity of management, especially executive?

It was easy to measure productivity of manufacting jobs for example, just
measure the number of items they make. However, despite increasing
productivity in manufacturing, their jobs were among the first to go.

Good enough to compensate for wage reductions? It's hard to say.
There could be a few rocky decades as the economy adjusts.

As I said, deflation is a spinning plane out of control.

Yousuf Khan

 

[Yousuf Khan]

This is only a small portion of Indians, and is where they are going
to lose against China if they don't get their act together.

You gotta take it one small step at a time. China's been uplifting itself
for the past twenty-five years. Whereas India is only within its first
decade of uplift.

India overall is not educating the masses, which is what you need for
economic dominance like America or Japan has experienced in the past.
Literacy rates in India are running around 50% (with more illiterate
women than men). China, OTOH, is educating everyone, and is building
considerable momentum. They're like a sleepy giant starting on their
2nd cup of coffee. Watch out when they finish the pot!

Yet there are countries with highly educated workforces, who have never been
economic superpowers (eg. Canada). So I would have to say, being highly
educated is nice, but not critical. More important is the size of the
population of the country.

In fact, you can't even say that the United States is a highly educated
country. High education goes to a very elite group of people in the US, and
their status means their children also get the same education. Concentrating
the education within a group of elites serves the country's aspirations just
as well a universal education system. In fact, I'd say concentrating the
education within the elites does a better job. Not everybody is cut out to
be highly educated -- as the saying goes, and this is true for many people,
all the education I needed, I got in kindergarten.

Another difference is that India is building soft industries
(software, design, other stuff that can be moved relatively quickly
and cheaply), while China is focusing on hard industry - brick and
mortar manufacturing that pays back into the community for decades and
is not easily transported elsewhere. Manufacturing is the life-blood
of a vital national economy.

Could be, but a lot of silicon valley's biggest companies were started by
Indian-educated persons (eg. Sun Microsystems). The reason India is getting
its recognition now is because a lot of these Indian transplants are now
helping to uplift their own country, after having made their fortune in
America. They are not choosing India just because it seemed like a nice
place to set up shop, they are going there because they know the education
levels over there personally.

The size of the population will work to the advantage of both, though.
Korea was starting to be a threat with low cost manufacturing, but the
population is small enough that raising the standard of living a lot
(hence the cost of production) didn't take so much. Raising the
standard of living of a billion Chinese is a longer-term project...

The size of the population of both of these countries means companies will
be salivating at selling products into their markets. Ever notice when China
first started getting noticed (over twenty years ago) that companies were
tripping over each other to try to setup a shop there? Never mind that there
was no way that they were going to make money for years to come, they just
wanted to be in a country with a billion people. I think India's entry into
the billion club started a similar ball rolling over there.

Yousuf Khan

 

[George Macdonald]

This is only a small portion of Indians, and is where they are going
to lose against China if they don't get their act together.

India overall is not educating the masses, which is what you need for
economic dominance like America or Japan has experienced in the past.
Literacy rates in India are running around 50% (with more illiterate
women than men). China, OTOH, is educating everyone, and is building
considerable momentum. They're like a sleepy giant starting on their
2nd cup of coffee. Watch out when they finish the pot!

Producing "intellect" is one thing - motivating it and capitalizing on it
is something else. The political/economic systems of either of the above,
especially China, has not so far proven itself adept at that. There's also
the question of massive, apparently uncontrollable, IP theft in China...
which is going to be released to the world in the next few months. Lawyers
are licking their chops.

Another difference is that India is building soft industries
(software, design, other stuff that can be moved relatively quickly
and cheaply), while China is focusing on hard industry - brick and
mortar manufacturing that pays back into the community for decades and
is not easily transported elsewhere. Manufacturing is the life-blood
of a vital national economy.

And yet without marketing and sales know-how, all the brick and mortar can
be just a wasted resource. In the end, in a working politico-social
system, who gets paid more - the guy who innovates or the guy who sells his
gadget?

The size of the population will work to the advantage of both, though.
Korea was starting to be a threat with low cost manufacturing, but the
population is small enough that raising the standard of living a lot
(hence the cost of production) didn't take so much. Raising the
standard of living of a billion Chinese is a longer-term project...

For various reasons, endogenous and exogenous, Korea has not been able to
capitalize on its manufacturing advantage as well as it might have. IMO
it's just as likely that China will desend into a morass of social
upheaval, inept management, both corporate & govt,. and incompetent
marketing. Nothing is given and you need a working/workable socio-economic
system to thrive.

Rgds, George Macdonald

"Just because they're paranoid doesn't mean you're not psychotic" - Who, me??

 

[KR Williams]

(e-mail address removed)
says...

Why stop at development/design? What prevents management from being
outsourced too? Heck, what prevents the board of directors from
outsourcing the CEO position?

The illiterati here will say the "golden-rule". Personally I
think it's a non-issue, or perhaps even a racist one.

 

[chrisv]

I would say 40-50 years from now, salaries in India/China/Russia etc.
will be a lot closer to those of the rest of the world, thus obviating
much of the economic advantage in outsourcing.

Bold prediction, there, Mike. 8) The question, from a US
perspective, is can we maintain our standard of living, while the
massive outflow of dollars raises the wealth of the rest of the world.

 

[chrisv]

No, you have the cause and effect backwards. Prices will lower for goods
for the same reason they'll lower for wages -- competition in a larger
economy.

What's weird is that you'll be able to buy a microwave oven for $24,
but it will always cost you $100+ to get a stupid union plumber over
and wrench on a pipe for you. And scumbag realtors will still want 7%
of your $400k house, for a few hours of work selling it... And then
there's medical costs...

What will force the adjustment in those "can't outsource it"
industries?

 

[chrisv]

Hmm, defining 'decent' as 50x the global average, I assume?

Touché, but you have to admit it's hard to go backwards, and it looks
almost inevitable that we will be pulled backwards. Of course, the
wealthy elite will get their's, no matter what - in fact, since they
pull the strings, they -increase- their compensation, even though the
average worker is losing-out.

And assuming that the only market which counts is the US market?

Well, the developed world is, for a lot of industries.

(ISTR there are more $ millionaires in Asia than in the USA)

Irrelevant. It's the over-all market that's important, unless you're
selling gold toilets or Rolls-Royces.

Yeah well, Usenet =is= kind of parochial that way..

Hint: the universe doesn't own =anyone= a living (although people born
on top of a pool of oil, or a pile of diamond bearing ore, may have some
reason for short term optimism).

I can accept that. What I can't accept so easily is the evil
businessman getting richer while everyone else gets poorer.

For example - what's a big reason why it's expensive to employ
American workers? Health insurance costs, to the tune of $500+ per
month per employee, right? A recent news story revealed that one of
the larger Health Maintenance Organizations (HMO), compensated it's
CEO to the tune of $90 MILLION dollars last year. And for what? For
over-seeing a bureaucracy that itself sucks-up about 40% of our
health-care dollars? Is this right?

 

[David Magda]

The reduction in salaries will be partially balanced out by the
reduction in the cost of goods. If outsourcing reduces the labor
costs of goods, it will reduce the cost of those goods.

You are assuming that the reductions of the cost in the producing of
goods will be transferred to the buyers of the goods, and not kept by
the company as profits.

No, you have the cause and effect backwards. Prices will lower
for goods for the same reason they'll lower for wages --
competition in a larger economy.

I've always wondered about this. Prices are said to drop with
competition. But in many "sectors in the economy" (love that phrase)
we see "consolidation" and mergers because by having everything under
one roof the overhead can be reduced and things be made more
efficient, hence giving the ability to lower prices. But with more
mergers, it means less companies competing against one another (read:
less competition).

Is it me, or does the logic seem strange?

No, sales won't tumble, they'll grow. Cheaper labor means
cheaper goods that poorer people can affort. Globalization means
larger markets to sell goods into.

Of course, if you lose your job to globalization, how do you get a
paycheque to buy these cheaper goods?

 

[David Magda]

I see salaries remaining stagnant more likely than salaries getting
chopped. Salaries getting chopped will bring the US in line with
the rest of the world more quickly, but at the risk of social
upheaval. Just look at the Soviets.

Or several countries in South America. Or am I thinking of
hyper-inflation? I really don't bother keeping tracks of these things
(which is probably a bad thing).

 

[David Magda]

education within the elites does a better job. Not everybody is cut
out to be highly educated -- as the saying goes, and this is true
for many people, all the education I needed, I got in
kindergarten.

Nor do all people even want it. I friend of mine taught "advanced"
grade 12 English (people going to university) and "regular" grade 12
English (people just needing a high school diploma before working in
their uncle's mechanic shop).

She liked the difference where in one class the discussion was more
abstract, but in the other there were more presentations (creating a
rap to describe/summarize Steven King's novel _Carrie_, or taking
your favourite song and describing where similies and analogies are
present in it). (FWIW, she teaches in Ontario, Canada).

Teaching (say) calculus to some students is pointless because: (i)
they don't care; (ii) they will (literally) never use it; (iii)
they'll get bored within two minutes; and (iv) they probably won't
understand it.

 

[David Magda]

Hint: the universe doesn't own =anyone= a living (although people
born on top of a pool of oil, or a pile of diamond bearing ore, may
have some reason for short term optimism).

I always like the saying (from one of the _Dune_ series of novels):

"You do not take from the universe. It grants what it wills."
-- Frank Herbert

I bit fatalistic (as the Fremen people in the books tended to be),
but not totally inaccurate.

 

[GSV Three Minds in a Can]

What's weird is that you'll be able to buy a microwave oven for $24,
but it will always cost you $100+ to get a stupid union plumber over
and wrench on a pipe for you. And scumbag realtors will still want 7%
of your $400k house, for a few hours of work selling it... And then
there's medical costs...

What will force the adjustment in those "can't outsource it"
industries?

A mobile labour force?

Actually Realtors are probably doomed (can be done over the www) ..
medical folks can travel (or the patient can .. many patients already
do). Plumber is probably tougher .. how far from the Rio Grande do the
Mexican plumbers currently operate?

 

[David Schwartz]

What's weird is that you'll be able to buy a microwave oven for $24,
but it will always cost you $100+ to get a stupid union plumber over
and wrench on a pipe for you. And scumbag realtors will still want 7%
of your $400k house, for a few hours of work selling it... And then
there's medical costs...

What will force the adjustment in those "can't outsource it"
industries?

Nothing really. It's just that the greater productivity and inflation
will allow you to pay the $100 for the plumber. Labor will always (50 years
at least, anyway) be more expensive in the United States, so it will be a
good place to work if you're doing a job that has to be done close to where
it's consumed.

DS

 

[George Macdonald]

Could be, but a lot of silicon valley's biggest companies were started by
Indian-educated persons (eg. Sun Microsystems). The reason India is getting
its recognition now is because a lot of these Indian transplants are now
helping to uplift their own country, after having made their fortune in
America. They are not choosing India just because it seemed like a nice
place to set up shop, they are going there because they know the education
levels over there personally.

Does India still have some kind of import quota system? I recall a few
years ago, when IBM started operations there to increase the indigenous
content of computers they wanted to sell there.

Rgds, George Macdonald

"Just because they're paranoid doesn't mean you're not psychotic" - Who, me??

 

[RusH]

The reduction in salaries will be partially balanced out by the
reduction in the cost of goods. If outsourcing reduces the labor
costs of goods, it will reduce the cost of those goods.

and the same goes for quality, it will be reduced ;-)

No, sales won't tumble, they'll grow. Cheaper labor means
cheaper goods
that poorer people can affort. Globalization means larger markets to
sell goods into.

actually no, globalization means "lets outsource our factories to
Yunnan or Hnom Penh where we can get 16h/day pregnant workers for as
low as 20-100$ a month." (nike/adidas)
"next lets convience as much as possible countries that its good to be
in some kind of a union (EU for example) so we can pump our stuff on
they'r markets without additional cost."

Good enough to compensate for wage reductions? It's hard to say.
There
could be a few rocky decades as the economy adjusts.

agreed, how one expects someone to buy, then that someone is unemployed
becouse his job was outsourced.

Pozdrawiam.

 

[RusH]

What's weird is that you'll be able to buy a microwave oven for $24,
but it will always cost you $100+ to get a stupid union plumber over
and wrench on a pipe for you. And scumbag realtors will still want
7% of your $400k house, for a few hours of work selling it... And
then there's medical costs...

What will force the adjustment in those "can't outsource it"
industries?

ar you sure ? there are plenty of e-commerce based realestate agencies



Pozdrawiam.

 

[RusH]

Heck, which
other country does most of its teaching in what is, to 99% of the
pupils, a second language? 8>.)

Korea


Pozdrawiam.

 

[KR Williams]

Yes since it allows much higher margins in future products when R&D costs
can be dropped. A U.S EE for intel probably makes 80K and you can hire an
Indian EE for about 5K so for the price of 1 US EE you get 16 Indians living
in a tin shack and you can have them work Shifts so productivity never stops
24/7.

Perhaps you'd better consider the TCO of an engineer. ;-) It's
nothing like 16:1, and likely not even 2:1. Then there are the
case studies of the horribly failed projects sent blindly to
India.

I would say 40-50 years from now all farming,manufacturing,development and
buisness processing (Accounting etc...) will be sent overseas, since its
cheaper and provides the companies much higher margins on the end product.

I've been hearing this for forty years. Not happening.