Semiconductor design is a frequently-cited example of the new wave of offshoring and foreign-outsourcing of service sector jobs. It is certainly a concern to U.S. design engineers themselves.

In addition to the current wave of white-collar outsourcing, the industry also has a rich experience with offshoring of manufacturing activity. Semiconductor companies were among the first to invest in offshore facilities to manufacture goods for imports back to the U.S. A brief review of these earlier manufacturing experiences and their impact on the fortunes of the domestic industry and its workers can help to illuminate the current debates over offshoring in services.

Because meaningful data about the impact of the offshoring of chip design (and even manufacturing) are limited, we rely on a more qualitative analysis for our key points. We have conducted dozens of interviews with engineers and managers at numerous semiconductor and related companies in the United States, Asia, and Europe over the past six years. Our research also incorporates the rich store of publicly available information in trade journals and company reports.

This paper describes the two previous stages of offshoring semiconductor assembly jobs and of outsourcing semiconductor manufacturing and the impact they had on the U.S. semiconductor industry. We argue that the initial concern about losing domestic jobs in both stages turned out to be unfounded as the industry used the situation to its competitive advantage by becoming cost competitive (assembly stage) and by developing the fabless sector (manufacturing stage). We then analyze the on-going stage of offshoring design jobs, and compare this stage to the two that came before in order to explore the possible impact on domestic jobs and the U.S. semiconductor industry. We begin in section one with a brief description of the stages of semiconductor production and our analytical framework. Section two looks at the offshoring of assembly jobs, and section three analyzes the foreign outsourcing of manufacturing. Section four explores the offshoring of design jobs, and concludes with a discussion of what this means for the U.S.

Global value chains span national and organizational boundaries in a growing number of industries. Knowledge creation and exchange within these diffuse networks is more complex than in the centralized R&D process of the past.

This research, based on extensive fieldwork with engineers and managers in multinational headquarters and subsidiaries in a number of high-tech industries, analyzes alternative modes of managing knowledge workers in this global setting. Strategic human resource management (SHRM), of which formal HR policies are but a small part, is necessary to structure formal and informal network activities, both within and beyond the firm.

We compare two archetypal high-performance SHRM systems and describe how they have evolved in practice. We analyze SHRM for global knowledge flows with offshore subsidiaries, value chain partners, allies, acquisitions, and corporate ventures. We also look at knowledge flows in informal personal networks and via the global circulation of knowledge workers. Finally we review lessons learned about SHRM practices to create and manage knowledge workers in global value chains.

Semiconductor design is a frequently-cited example of the new wave of offshoring and foreign-outsourcing of service sector jobs. It is certainly a concern to U.S. design engineers themselves. In addition to the current wave of white-collar outsourcing, the industry also has a rich experience with offshoring of manufacturing activity. Semiconductor companies were among the first to invest in offshore facilities to manufacture goods for imports back to the U.S. A brief review of these earlier manufacturing experiences and their impact on the fortunes of the domestic industry and its workers can help to illuminate the current debates over offshoring in services. Because meaningful data about the impact of the offshoring of chip design (and even manufacturing) are limited, we rely on a more qualitative analysis for our key points. We have conducted dozens of interviews with engineers and managers at numerous semiconductor and related companies in the United States, Asia, and Europe over the past six years. Our research also incorporates the rich store of publicly available information in trade journals and company reports. This paper describes the two previous stages of offshoring semiconductor assembly jobs and of outsourcing semiconductor manufacturing and the impact they had on the U.S. semiconductor industry. We argue that the initial concern about losing domestic jobs in both stages turned out to be unfounded as the industry used the situation to its competitive advantage by becoming cost competitive (assembly stage) and by developing the fabless sector (manufacturing stage). We then analyze the on-going stage of offshoring design jobs, and compare this stage to the two that came before in order to explore the possible impact on domestic jobs and the U.S. semiconductor industry. We begin in section one with a brief description of the stages of semiconductor production and our analytical framework. Section two looks at the offshoring of assembly jobs, and section three analyzes the foreign outsourcing of manufacturing. Section four explores the offshoring of design jobs, and concludes with a discussion of what this means for the U.S.

This paper is based on research conducted for our forthcoming book, Change Is the Only Constant: How the Chip Industry Deals with Crisis. Clair Brown is professor of economics and director of the Center for Work, Technology, and Society (IRLE) at University of California, Berkeley; Greg Linden is senior research fellow at the Center for Work, Technology, and Society at UC Berkeley. Yongwook Paik provided excellent research assistance. The authors would like to thank the Alfred P. Sloan Foundation, the Institute for Research on Labor and Employment at UC Berkeley, and the Institute for Technology, Enterprise and Competitiveness (ITEC/COE) and Omron Fellowship at Doshisha University, Japan, for funding. We are grateful to Ben Campbell, Bob Doering, David Ferrell, Michael Flynn, Gartner Dataquest, Ron Hira, Dave Hodges, Rob Leachman, Daya Nadamuni, Elena Obukhova, Devadas Pillai, Semiconductor Industry Association, Chintay Shih, Gary Smith, Bill Spencer, Strategic Marketing Associates, Yea-Huey Su, Tim Tredwell, and C-K Wang for their valuable contributions. Melissa Appleyard, Hank Chesbrough, Jason Dedrick, Rafiq Dossani, Richard Freeman, Deepak Gupta, Bradford Jensen, Ken Kraemer, Frank Levy, B. Lindsay Lowell, Jeff Macher, Dave Mowery, Tom Murtha, Tim Sturgeon, Michael Teitelbaum, and Eiichi Yamaguchi, as well as participants at the NAE Workshop on the Offshoring of Engineering, the 2005 Brookings Trade Forum on Offshoring of White-Collar Work, the Berkeley Innovation Seminar, and the Doshisha ITEC seminar series provided thoughtful discussions that improved the paper. We are especially grateful to Gail Pesyna at the Sloan Foundation for her long-running support of, and input into, our research. The authors are responsible for any errors.