By Bruce Einhorn "Jobs. Jobs. Jobs." That was the mantra for the first President Bush when he traveled to Japan for a summit meeting in Tokyo during the early-1990s recession. Now, as the second President Bush campaigns across the U.S. to promote his new economic stimulus package, the issue of helping the beleaguered American worker once again tops the agenda. To make the point clear, the President last week spoke in a St. Louis warehouse in front of the comforting slogan "Strengthening America's Economy" and surrounded by boxes labeled "Made in U.S.A."
Yet even as Bush tries to do something to boost American jobs, more and more multinationals are shifting them overseas. And, as BusinessWeek's Feb. 3 Cover Story explains, more and more of these jobs aren't just in manufacturing but in services and high tech. Asian countries -- especially China and India -- are attracting the bulk of them.
Skeptics might say American companies are just looking for cheap labor, copying the strategies of labor-intensive manufacturers that poured billions of dollars into China in the 1980s and 1990s as they capitalized on its vast pool of dirt-cheap, unskilled workers. And sure enough, Motorola (MOT) President and Chief Operating Officer Mike S. Zafirovski does concede that "access to lower costs of resources" is a big reason that his company has pledged to invest $3.4 billion in China.
NO APOLOGIES. He and many other multinational executives insist, however, that this strategy isn't about just money. According to Zafirovski, Motorola is after more than factory workers or software engineers who work at a fraction of what their U.S. counterparts earn. China, he says, has a gigantic market and large talent pool that Motorola needs in order to compete. "China is extremely well-positioned," he says. "We want to be a part of it."
Motorola may not be scoring many points back home as it hires workers in Asia while so many Americans are either out of work or worried about layoffs, but Zafirovski makes no apologies. In his view, the company has no choice but to increase its workforce overseas. "It's a basic philosophy, a smart way to be running a global company," says Zafirovski. "Can the U.S. on its own be a base for exports?" he asks -- then quickly answers his question: "That's just an incorrect premise."
Some executives from other companies tell me that China really isn't all that cheap anyway. Consider Ya-qin Zhang, head of Microsoft's (MSFT) Beijing-based Asia research center. He's quick to object when I ask if Bill Gates saves lots of money by expanding his workforce in the Chinese capital rather than in Microsoft's other big research hubs. "The overall cost is about the same," he says. "In China, salaries are lower. But travel costs and other benefits [balance that out]."
ROUND-THE-CLOCK RESEARCH. Still, that's not stopping Microsoft from building up its Beijing research operation. In Redmond, Wash., Microsoft has 350 researchers; in Cambridge, England, 80; in Silicon Valley, 21. By mid-2003, Zhang estimates, Microsoft will have 180 in Beijing, an annual growth rate of 30%. Boasts Zhang: "We have an army of students. In China, we are the most prestigious lab. All the students want to work with us. We haven't encountered a single case where our offer has been declined." Every day, he adds, Microsoft gets 50 résumés.
So if China isn't so much cheaper, why bother? For starters, having research centers around the globe helps companies get work done faster, as engineers in one time zone start working just as others are calling it a day. Labs in Beijing (or Bangalore, or other places far from the Pacific Northwest) help companies like Microsoft that want to be able to do research round-the-clock.
Another lure is brainpower. Says Zhang: "The main reason to have a lab in Asia is not cost. That's insignificant. The most important reason is to attract and leverage local talent. For research, quality is the most important thing."
"HAVE TO FOLLOW." Jason Chen, vice-president and general manager of Asia Pacific for Intel (INTC), agrees. "We want Intel to be a true multinational. We do continue to invest in the U.S., but we understand very well that this industry is a global industry," he says. "We want to make sure that we are taking advantage of the best quality talent pool around the world."
Frans van Empel, the Shanghai-based chief technology officer for Philips (PHLKFM) in China, says multinationals have no choice but to boost their high-skilled workforce in Asia rather than in Europe or North America. "The action is in China, so we have to focus on China," he says. "Look at what China is doing. It has one-fifth of the world's population. The government is positioning itself as a global player. When China is becoming a player, you have to follow."
By adding more engineers in China rather than in Holland, Philips says it can have a better sense of what works and what doesn't in this key market. "This helps Philips know what's cooking," he says. "You have to tap the resources in a country as important as China to produce the right products."
MADE WHERE? All this might be good news for multinationals looking to improve their chances in the world's hottest markets. But it doesn't bode so well for Americans who are worried about their jobs. China's advantages are huge, as the organizers of President Bush's St. Louis speech have painfully realized. While the boxes arranged around the President said "Made in the U.S.A.," CNN reports that the goods were actually made in China.
With companies doing more white-collar hiring in Asia to go with the manufacturing jobs they've already shifted there, it'll take more than Presidential speech-making to keep skilled Americans in the jobs they were trained for. Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online