San Jose, CA—U.S. has a diminishing capability to maintain competitive manufacturing leadership and parity, said James W. Bagley, chairman of Lam Research Corp., in a speech to San Jose State University's College of Engineering..

He focused on China, which now is becoming competitive in manufacturing technology, software, and engineering capability across the spectrum, physics, chemistry, and biotechnology. Whether through design or luck, China has co-opted the largest retail organization—WalMart—into being its worldwide distribution system. The result of this distribution capability has been a disruptive transformation in balances of global trade and has allowed China to acquire substantial foreign currency reserves. As anyone in business knows, market access is an imperative and is usually achieved through substantial investment and hard work. China got its warehousing, distribution, and retail outlets at no cost, Bagley suggested.

The U.S. is outsourcing manufacturing at an alarming rate. Each year China is creating manufacturing jobs at a rate equivalent to the entire U.S. manufacturing workforce. Some recent eye-opening information from Jay Pinson, dean emeritus of San Jose State conveyed to Bagley was:

• Today the U.S. graduates about 55,000 engineers a year—with the rate declining for the last 20 years;
• Both law and business students are graduating at about three times the rate of engineers—about 330,000 in the aggregate;
• India graduates 300,000 engineers annually; and
• China mints 350,000 new engineers each year

Aggravating that situation is that, of the U.S.' 55,000 graduates, a significant percentage are foreign nationals who may or may not stay in the United States.

The U.S. cannot compete with India and China on a raw-numbers basis, nor should it—look at a combined 650,000 engineering graduates as opposed to its 55,000—because India and China are competitors. What the U.S. should focus on is dramatically increasing the number of its engineering and science graduates in those areas where it can develop and maintain a competitive advantage projected over time, the engineering graduate gap, by 2010, will result in over 90% of the world's engineers living in India, China, and the rest of Asia. The large number of U.S. engineering graduates now retiring underscores this trend.

Bagley said, "The U.S. must find a way to establish competent instruction in K-12 supporting math and science preparedness. It is a political issue, if the comfort zone of some people must be disrupted to save our children and the future of our country then the decision is obvious."

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