December 13,
2006
Design
Work is Moving Out of the U.S.
As
manufacturing continues to leave North America for Asia, Mexico and Eastern
Europe, engineering is beginning to follow. While much of the design work for
electronic products is still completed in North America, the engineering work
to support outsourced manufacturing has traveled with the manufacturing. The
cost of engineering is significantly lower outside North America. Plus, the
engineering work for manufacturing needs to be close to production.
Recently,
however, some of the design work is also moving east and south. The government
is Mexico has pushed hard in the last few years to graduate engineers and tout
their expertise to the world. India and China are also producing engineers in
large numbers as they compete for the world’s smart work.
Companies
such as General Electric, General Motors, Honeywell and auto supplier, Delphi,
have large research centers in Mexico working on design modifications and
testing of cars as well as military and commercial jet engines. GE Engines
employs 600 engineers, while Delphi has 2,200 engineers working on projects at
its facilities in Guadalajara. The cities of Guadalajara and Monterrey have
both become centers for manufacturing and design engineering. According to the
Secretaria de Economia of Mexico, there are 700 companies with manufacturing in
Guadalajara. Companies include IBM, HP and contract manufacturer, Flextronics.
The
border states of Mexico are also centers for manufacturing. According to the
American Society of Mechanical Engineers, Honeywell Aerospace recently broke
ground on a $40 million systems integration and testing laboratory in Mexicali,
which sits by the border with Arizona, The facility will employ 300 engineers
to run simulations for aircraft systems developed by Honeywell Worldwide.
While
the number of engineers working in Mexico is small compared to the United
States, Mexico has been churning out a high number of engineers lately.
According to Business Week, there are currently 451,000 full-time engineering
students in Mexico, compared with 370,000 in the United States. Engineers in
Mexico are gaining a good reputation for quality. Detroit automakers now claim
that engineers in Mexico are close to equal in experience to their U.S.
counterparts. “In terms of the marketplace, the quality of the engineers in
Mexico is fairly high. They’re cranking out good quality engineers,” says Bruce
Rayner, director of research and consulting at Technology Forecasters Inc. in
Alameda, Calif. “Are they as good as MIT graduates? No. But there are certain
types of design they do well.”
Rayner
notes that U.S. electronic companies and the local governments of Guadalajara
and Monterrey Mexico have all participated in building the design engineering
community in Mexico. “Some of the design centers were set up by the U.S. OEMs,
and some were set up by the government itself,” says Rayner. “What they created
is a low-cost opportunity for U.S. companies to tap into.”
India
and China are also producing a high number of engineers. According to recent
research from Duke University’s Pratt School of Engineering Research, India is
graduating 350,000 engineers each year, while China is producing 600,000. The
United States produces 70,000. In all fairness a good portion of the Indian and
Chinese engineers are coming out of two-year programs, while virtually all of
the U.S. engineers are earning four-year and graduate degrees.
The
design engineering done by U.S. companies in India and China tends to be
regional in nature. “The design work in India and China is about serving local
markets,” says Rayner. “It’s a regional approach to engineering. Companies are
setting up design centers in India and China for design for manufacturing and
for designing products for the local market.”
Rayner
notes there is another area of design work in Asia being done by electronic
manufacturing services (EMS) companies. “We looked at the EMS sector and
they’ve been expanding their services upstream into design,” says Rayner. “The
EMS companies are looking at design both because their OEM customers are
demanding it and because they believe it may help build their margins.” Rayner
notes he is doubtful EMS providers will be able to bolster their margins with
design services, since all of their pricing is on the table for negotiation.
There
are some engineering jobs that are not likely to leave North America. They
include research, conceptual design, intellectual property development,
collaborative design with customers and design work requiring U.S. security
clearances.
Visit SourceESB.com for all your sourcing needs.
We would like to hear from
you. Please e-mail article feedback or
comments to esbideas@SourceESB.com