GAO report details offshore shift of IT manufacturing, services

GAO report details offshore shift of IT manufacturing, services    A September U.S. Government Accountability Office report on the offshore movement of semiconductor production and software development said the United States must fund research and development efforts to keep pace with fast-responding competitors in Asia.
   “The ability of the United States to compete depends on research and development investment, innovative academic environments attracting top-quality students, and a competitive business environment,” the report said. “It will be important for U.S. businesses and policymakers to keep alert to technological changes and competitor countries’ strategies while enhancing the elements of the innovation environment in the United States,” the GAO report said.
   The report explained how foreign production of semiconductors in 1960s and 1970s eventually led to the shift of software development in burgeoning Asian economies like China, Taiwan and India in the 1990s.
   “Technological advances helped firms in the semiconductor industry improve their management of global supply chains and logistics,” the report said. “Regarding software services, technological advances opened the way to trade in programming and other software services. Foreign government policies in Taiwan and China created favorable investment conditions for U.S. semiconductor firms. India changed its emphasis from state-owned enterprises in the 1970s to an environment more amenable to private enterprise by the mid-1980s. Although its restrictions on foreign investment constrained the software services industry’s overall development, India established software technology parks in 1990 to give domestic firms preferential access to the infrastructure essential for offshored operations.”
   The report found that though IT manufacturing and software services have increasingly moved to Asia, the United States still remains a major player.
   “U.S. production data show that both industries have largely rebounded from the 2001 recession,” the GAO report said. “Employment data show a mixed picture, with semiconductor employment remaining flat and software employment mostly recovering. The United States has global trade surpluses in the semiconductors and software services sectors, although production is increasingly shifting to Asia.”