Not just China and India

Dennis Posadas says other Asian countries make good choices for outsourcing research and development as well

By Dennis Posadas
AsiaMedia Contributing Writer

Tuesday, February 27, 2007

Manila --- Research and development is moving into Asia. And it's moving into many parts of Asia, not just India and China.

The Philippines is not necessarily a country on the R&D outsourcing radar of many American and European multinational companies. Yet a trickle of outsourced R&D does make it into the Philippines after China and India have taken their share. Companies like Intel, Texas Instruments, Philips, Trend Micro and Cypress do some types of development work here. Some multinational companies like Intel, Sanyo and Canon even do some of their chip design work here.

Unfortunately, the international press seems to have fallen in love with China and India as the new R&D frontier for Asia. From the reports in big international publications like BusinessWeek, Forbes and Fortune, and even specialized technology publications like Red Herring, you would think that the only R&D going on in this part of the world is happening in China and India. What is not as well reported is that other countries are increasingly taking part in research activities, a natural consequence of the outsourcing of manufacturing of electronics and semiconductors that began in the 1970s. Semiconductor companies like Intel, Hewlett Packard and Texas Instruments set up their factories in countries like the Philippines, Singapore and Malaysia. Even companies like Google are starting to wake up to the tremendous opportunities in Southeast Asia.

The quality of homegrown R&D in Asia, even in countries like the Philippines, has gone up. Take the case of a recent University of the Philippines paper that describes a new technique for inspecting microchips. This paper was selected by the prestigious Optical Society of America as one of the "most exciting" research papers published in 2006. Another example is Philippines-made software that trains users in the Java computer language and was acknowledged by Sun Microsystems CEO Scott McNealy during the June 2005 JavaOne conference in the United States. These innovations need more attention and recognition. The overseas skilled diaspora of various Asian countries (excluding China and India) will have a big role to play in getting underdog Asian countries their own slices of the R&D outsourcing pie.

Take Dr. Gregory Tangonan, a graduate of the California Institute of Technology who for many years managed the R&D arm of a major U.S. high technology company in Los Angeles, California. Tangonan has since retired; he shuttles back and forth between the Philippines and the United States and now teaches electronics engineering to undergraduate students at the Ateneo University in Manila. Like many skilled Asians who originally migrated to the United States, individuals like Tangonan find that going back to their home country offers some new opportunities, especially in this time of increased R&D outsourcing. Highly skilled individuals like Tangonan are instrumental in getting R&D outsourcing opportunities to Asia because they have the respect of their peers in American universities and high tech companies back home. More organized diaspora initiatives -- such as The Indus Entrepreneurs in India, China's Hua Yuan Science and Technology Association, Taiwan's Monte Jade Science and Technology Association, the Philippines' Brain Gain Network and the Philippine-American Academy of Science and Engineering -- all try to organize skilled Asians like Tangonan to help in their home countries. They mentor researchers and graduate students, advocate for improved science and technology policies, or, in the case of Taiwan, organize venture capital funds.

The future of R&D outsourcing is not entirely clear, however. U.S. Sen. Hillary Clinton's plans to become the Democratic Party's presidential candidate could throw a wrench into Southeast Asia's growth. Clinton is known as a staunch opponent of outsourcing, preferring instead to keep these opportunities in the United States, as she articulated in an Aug. 2004 opinion piece in The Wall Street Journal. She is concerned about America's declining role in innovation. “We cannot afford to fall behind India and China, who graduate far larger numbers of scientists and engineers,” she wrote. After all, places like Bangalore, Hsinchu, Pudong show up regularly in the American media as places of innovation.

The big players in Asia's R&D for the next few years to come will definitely remain China and India. But for the international technology media to assume that these are the only countries where tech R&D occurs is simply viewing the innovation outsourcing phenomenon through myopic eyes. When the international press takes a moment to look, they will see that other Asian places like the Philippines can be competitive as well.

They will also see that the United States has nothing to fear from R&D outsourcing to Asia. Asian countries' participation in the global economy will hopefully mean stronger economies and, in the end, strong economies mean less fertile grounds for extremist thinking to flourish.