On February 25, 2005 a panel of researchers presented preliminary findings from surveys of 176 CASPA members (171 valid responses). The discussion included the interpretation of study findings, key issues and trends, and implications for professionals, corporate managers, and policymakers in the semiconductor industry. Panelists included Hsing-Hsiung (Hubert) Chen (pictured above left), SPRIE visiting scholar and director of Integrated Research Division, ITRI; Jian Hung Chen (pictured above center), SPRIE visiting scholar and ITRI researcher; and Mr. David Wang (pictured above right), vice president, Fibera Inc., CASPA President 2003-2004.

The Rise of Greater China in the Global Semiconductor Industry

Dr. Hsing-Hsiung Chen shared with the participants some striking statistics that clearly highlighted the rise of Asia and Greater China in the semiconductor industry. While in 1985 Asia accounted for only one percent of worldwide semiconductor production and 7 percent of worldwide semiconductor consumption, the numbers are expected to reach 21 percent and 42 percent respectively in 2005. The story for Greater China is particularly salient. Take the year of 2004 as an example. In IC design, the top thirty firms in this sector commanded 86 percent of the worldwide market share and half of them were founded or co-founded by Chinese professionals. In fabrication, eight of the top ten foundry companies were Chinese and together they covered 88 percent of the market. A similar story can be told about packaging and testing companies, with eight of the top ten companies located in Taiwan and mainland China and accounting for half of the global market share.

The Connection of Silicon Valley Professionals to Greater China

Mr. David Wang pointed out the role of the Silicon Valley as a hotbed for entrepreneurs, managers, and engineers that found or join semiconductor companies in Greater China. For example, CASPA, a leading semiconductor professional organization for Chinese Americans, has over 3,500 members in the United States and Asia, with the majority residing in the Silicon Valley. Among 171 CASPA survey respondents, half had worked in the United States and Greater China. Fifteen percent had worked at more than one place in Greater China.

Many aforementioned top Chinese semiconductor companies have strong ties to the Silicon Valley. Companies such as SST and ISSI were founded by Chinese in the Silicon Valley but have strong presence in the Greater China region in production and sales. Other Greater China-based companies like UMC, SMIC, ASMC, HuaHong NEC, and Winbond have drawn an impressive list of senior managers from Silicon Valley companies.

Job Movement Trends

Dr. Jian-Hung Chen presented some preliminary findings of the surveys and identified some interesting trends in job movement. When being asked "Will you consider working permanently in a region different from your current location?" 7 percent of the respondents revealed that they were already considering moving, while 52 percent said they would consider moving within 1-3 years. Young professionals (with fewer than ten years of work experience) were somewhat more likely to move within three years (65 percent) than more experienced professionals (~57 percent). In terms of geographic destinations, only 10 percent favored moving to or relocating to elsewhere in the United States. The rest all preferred relocations within or to Greater China. Shanghai was the most popular site, voted by 50 percent of the respondents as their preferred destination. Taiwan and Beijing followed with 13 percent and 14 percent of the votes. Breaking down the data according to the origin of the respondents into Mainland China, Taiwan and the United States (indicated by the location of undergraduate education), Shanghai remains the topic choice for all three populations. Interestingly, professionals originally from Taiwan were more likely to move to Shanghai (39 percent) than return to Taiwan (33 percent) and none of the professionals originally from mainland China regarded Taiwan as an option.

An examination of key influential factors on movement decisions may shed some light on the observed trends. Growth potential, family matters, and quality of Life were ranked the three most important factors in one's movement decision. others' success/failure examples and company decision received the lowest scores. Senior professionals were more likely to be influenced by company decision (compared to junior professionals), while junior professionals more by others' success/failure examples (compared to senior professionals). Host company size did not seem to be a noteworthy differentiator.

Finally, in terms of the type of company one hopes to work for after relocation -- the choices being startup, multinational, local company and company decision (i.e. internal transfer) -- professionals moving to Taiwan strongly favored local company and internal transfer, while professionals moving to Beijing and Shanghai preferred startup much more than the other three modes.

Greater China's Regional Advantage

Several participants chipped in their insights on the mainland's labor cost advantage. For semiconductor professionals moving from the Silicon Valley to Shanghai, "The rule of thumb is a 1/3 to 1/2 pay cut, although they may be awarded with [the realization of] the growth potential through other forms, such as stock options" observed Mr. Wang. Such expatriate compensation packages are still substantially higher than those for local hires, whose salary level is usually 20-25 percent of that of the Silicon Valley. Overall local income increase is estimated to be about 5-10 percent a year, although most of it is due to the move up the semiconductor industry value chain. Salary increase for the same position is probably less than 5 percent a year. Entry-level salary has also been heavily affected by the recent surge in the local supply of engineers, thanks to a substantial increase in college engineering graduates. Hence, taking into account differences in cost and experience, "for now, the common and effective practice seems to be hiring one expatriate for every 25 local hires," said Dr. Jian-Hung Chen.

Going beyond cost considerations, discussions centered around a provocative question raised by a member of the audience: "Is it just a question of time or is there any other fundamental piece that needs to get in place before Chinese firms can penetrate high value-added nodes in the semiconductor industry value chain [i.e. design]?" SPRIE Director, Professor Henry Rowen responded by pointing out that although to this day, probably only a handful of the 400-500 design companies in Mainland China have real technologies and products, let alone profits, Chinese fabless design companies are growing rapidly and can find lots of applications in the domestic market, especially in telecommunication. Dr. Wang concurred that it is probably more of a matter of time. "If a foundry moves to the next-generation technology, firms up- and down-chain will follow suit and build complementary capacities as well. It's a clustering effect. It just takes time."

Other Issues

Panelists and the audience also engaged in lively discussions about corporate strategy for semiconductor multinational companies in Greater China, family, social and cultural factors affecting the flow of talents, and inter-regional collaboration. Networks and flows of managerial and technical leaders -- particularly their connection to the Silicon Valley and their worldwide reach -- are new priority areas of research for SPRIE.

PALO ALTO, Calif. -- The European Union is increasingly showing a new independent stance on foreign-policy issues as the logic of its industrial and economic integration plays out in the international arena.

Already the EU has taken a distinct and independent approach to both the Israel-Palestinian conflict and the nuclear crisis in Iran. Now it has broken ranks over the Korean Peninsula, fed up and concerned with the failure to resolve the ongoing crisis over North Korea's development of nuclear arms.

Reflecting this new stance, the European Parliament this week passed a comprehensive resolution on the Nonproliferation Treaty (NPT) and nuclear arms in North Korea and Iran:

• It urges the resumption of the supply of heavy fuel oil (HFO) to North Korea in exchange for a verified freeze of the Yongbyong heavy-water reactor, which is capable of producing weapons-grade plutonium, to avoid a further deterioration in the situation. At the same time it is calling for the European Council and Commission to offer to pay for these HFO supplies.
• It urges the Council of Ministers to reconsider paying 4 million Euros of the suspension costs for KEDO (the Korea Energy Development Organization) to South Korea to ensure the continued existence of an organization that could play a key role in delivering energy supplies during a settlement process.
• It demands that the Commission and Council request EU participation in future six-party talks, making it clear that the EU will in the future adopt a "no say, no pay" principle in respect to the Korean Peninsula. Having already placed more than $650 million worth of humanitarian and development aid into the North, it is no longer willing to be seen merely as a cash cow. This view was backed in the debate by the Luxembourg presidency and follows a line initially enunciated by Javier Solana's representatives last month in the Parliament's Foreign Affairs Committee.
• It urges North Korea to rejoin the NPT, return to the six-party talks and allow the resumption of negotiations.

The EP cannot substantiate U.S. allegations that North Korea has an HEU (highly enriched uranium) program or that North Korea provided HEU to Libya. It has called for its Foreign Affairs Committee to hold a public hearing to evaluate the evidence. "Once bitten, twice shy" is the consequence of U.S. claims that Iraq possessed weapons of mass destruction.

The world order is changing; the EU -- like China -- is emerging as a significant global power economically with the euro challenging the dollar as the global currency (even prior to the latest enlargement from 15 to 25 member states, the EU's economy was bigger than that of the United States). Speaking at Stanford University earlier this month, former U.S. foreign policy adviser Zbigniew Brzezinski pointed out that the EU, U.S., China, Japan and India will be the major powers in the new emerging global order. Since the new Asia will have three out of the five major players, he stressed the importance of engaging with it.

How will those already in play respond? Some may claim that statements by North Korea welcoming the EU's involvement and participation are merely polite, inoffensive small talk that cannot be taken seriously. Yet there have been a spate of pro-EU articles appearing in Rodong Sinmun, the daily newspaper of the Central Committee of the Korean Workers Party, since 2001.

Of 128 EU-related articles between 2001 and 2004, a majority praised Europe's independent counter-U.S. stance, emphasized its increasing economic power and influence, and heralded its autonomous regional integration. Rodong Sinmun portrays the EU as the only superpower that can check and balance U.S. hegemony and America's unilateral exercise of military power.

North Korea's perception of the EU is well reflected in articles such as: "EU becomes new challenge to U.S. unilateralism"; "Escalating frictions (disagreements) between Europe and U.S."; "European economy (euro) dominating that of the U.S."; "Europe strongly opposing unilateral power play of U.S.," and so forth.

Concurrently, North Korea has pursued active engagement with the EU by establishing diplomatic relations with 24 of the 25 EU member states (the exception being France). It is not necessary to read between the lines to recognize North Korea's genuine commitment to engagement with the EU based on its perception of the EU's emerging role on the world stage.

The Republic of Korea has publicly welcomed the prospect of EU involvement, while China wishes to go further and engage in bilateral discussions with the EU on its new policy toward the North. Russia will follow the majority. The problem is with Japan and the U.S.

In Japan, opinion is split by hardliners in the Liberal Democratic Party who view problems with North Korea as a convenient excuse to justify the abandonment of the Peace Constitution. They don't want a quick solution until crisis has catalyzed the transformation of Japan into what advocates call a "normal" country.

The U.S. expects an EU financial commitment, but not EU participation. The neocons believe that EU participation would change the balance of forces within the talks inexorably toward critical engagement rather than confrontation.

The question is whether the EU's offer will point the U.S. into a corner or trigger a breakthrough. Will U.S. fundamentalists outmaneuver the realists who favor a diplomatic rather than military solution? Only time will tell.

Glyn Ford, a Labour Party member of the European Parliament (representing South West England), belongs to the EP's Korean Peninsula Delegation. Soyoung Kwon is a postdoctoral fellow at Stanford University's Asia-Pacific Research Center.