Dr. Rodgers' Testimony: Immigration: The View From Silicon Valley | Cypress Semiconductor
Dr. Rodgers' Testimony: Immigration: The View From Silicon Valley
Dr. Rodgers' Testimony: Immigration: The View From Silicon Valley
Testimony to Senate Judiciary Committee
THE SENATE JUDICIARY COMMITTEE
February 25, 1998
IMMIGRATION: THE VIEW FROM SILICON VALLEY
STATEMENT OF DR. T. J. RODGERS
PRESIDENT AND CEO
SAN JOSE, CA 95134-1599
Senators Hatch, Abraham, and Committee members, thank you for inviting me here today to discuss the shortage of high-tech workers and U.S. immigration policy; in particular, the proposal to raise the annual quota of so-called H1-B visas, which enable skilled engineers and scientists to enter the United States to work for American high-tech companies.
Cypress Semiconductor is a $600 million international supplier of high-performance semiconductors for the computer, networking, and telecommunications industries. We will be 15 years old on April 7. We employ 2,771 people. We design our chips in San Jose, CA; Minneapolis, MN; Seattle, WA; Portland, OR; Colorado Springs, CO; Austin, TX; Starkville, MS; London, England; Bangalore, India; and Cork, Ireland. We manufacture our chips in Minneapolis and Austin. Our retained earnings (lifetime cumulative profit) are $334 million, making us the 15th most profitable semiconductor company in the history of the American semiconductor industry. In short, Cypress Semiconductor is a typical Silicon Valley success story-and our positive experience with immigrants is also very typical.
The semiconductor business is one of the most competitive you will find, and we have strong feelings about the value provided by immigrant engineers-and also about the factually hollow, emotion-driven claims of those who insist the U.S. semiconductor industry could retain its current global leadership without an adequate supply of high-quality engineers, including immigrants. Underlying the arguments of the critics is the notion that immigration is a zero-sum game-that each job for an immigrant means one less for a U.S. native. That idea is unquestionably false; skilled H1-B immigrants create jobs for native-born Americans, as I will show.
As I proceed to refute a number of conventional, but incorrect arguments against legal immigration using real data from Silicon Valley, the following points will become evident:
- The need for skilled workers in the high-tech sector is growing exponentially, causing chronic shortages. The curtailment of immigration, one important source of skilled workers, would cause America to lose a competitive advantage to other countries.
- Foreign skilled workers do not take jobs from domestic workers, but, in fact, create additional jobs.
- Congressional inaction on the current immigration cap for skilled workers would accomplish what our worst economic enemies hope to achieve through competitive strategies.
- Members of Congress who would allow an increase in the H1-B skilled worker immigration cap only at the expense of family immigration attempt to pit immigration groups against one another to effectively kill any chance of increasing the cap. This political maneuver would hurt American high-technology business and would be viewed in Silicon Valley as politics-as-usual.
- The loss of a reliable supply of skilled workers will leave many high-tech companies with little choice but to locate operations in other countries with an adequate supply of skilled workers.
Let's look at the arguments and counterarguments surrounding legal immigration. As we will see, the data supports only one conclusion: Legal immigration provides tangible economic benefit to a broad cross section of Americans.
Bad argument #1: American high-technology companies don't make enough of an effort to recruit engineers at home, thereby increasing their dependence on foreign-born engineers.
Despite intensive recruiting and training efforts, Cypress Semiconductor-like virtually all of its competitors in the semiconductor business-cannot find enough talented engineers to keep our company growing at the rate it could grow with more people.
Cypress recruits from a total of 26 major schools nationwide (see Appendix A). Our Human Resources department helps, but the drivers of the recruiting program are our vice presidents. Many of them are alumni of the schools they are assigned to engage. The point is that college recruiting is a high priority at Cypress, as it is at most high-tech companies in Silicon Valley.
Why is there a shortage of engineers? High-technology companies spend tens of millions annually to bolster science learning while sponsoring job fairs and recruiting intensely on U.S. campuses. Both my company and I personally have contributed directly and substantially to the Stanford Electrical Engineering program. Stanford is currently raising $200 million from Silicon Valley entrepreneurs specifically to endow 300 science and engineering graduate student fellowships to replace those lost due to recent federal R&D budget cuts. Despite these recruiting efforts and education funding, the domestic supply of engineers is still inadequate. The unemployment rate of electrical engineers is at an all-time low of 0.4%, as reported this month in Electrical Engineering Times, our highest-circulation trade publication (see Appendix B). At the same time, most high-tech companies have dozens to thousands of positions open, in some cases for years.
Bad argument #2: American high-tech companies need to import engineers because they don't adequately train the engineers they recruit.
After Cypress recruits engineers, we provide numerous in-house technical and nontechnical courses, resulting in thousands of hours of training each year. Older companies like Intel and National Semiconductor provide even more extensive in-house training courses.
In addition to in-house trainers like me, we also hire professional trainers, including professors from Stanford University, the University of Santa Clara, and U.C. Berkeley. Cypress also pays for outside education. We offer our employees the opportunity to return to school part-time or even full-time to get advanced degrees, underwritten by Cypress up to a maximum of $7,500 per year
Despite our significant investment in recruiting and training, we have historically averaged between 75 and 250 openings at any given time. Currently we have 75 openings, even though we are in one of the deepest pricing recessions in semiconductor industry history.
Fifty-nine of our current 75 openings are for engineers (see Appendix C)-we tend to delay non-engineering hiring during bad times, but we never stop recruiting engineers. Our current engineering shortfall translates into approximately 10 new-product development projects that we are unable to start. (Appendix D lists 17 projects that are ready to be launched and waiting for engineering staffing.) The direct consequence of unlaunched projects is slower growth, which, in turn, means we will fail to create all the new jobs we would under full-employment conditions. Even with our intensive recruiting efforts bolstered by the hiring of some immigrant engineers, we are still not fulfilling all of our employment needs.
Bad argument #3: Immigrants take jobs from native-born Americans.
This is the weakest of all arguments against legal immigration, although it certainly has high emotional appeal to some. Consider the case at Cypress, which is run by 10 vice presidents and me, and which is overseen by four outside directors. Our management team supports 2,771 jobs, 2,011 of which are in the U.S. Four of our 10 vice presidents are immigrants, as are two of our four outside directors.
John Torode, our vice president of the Seattle Computer Products Division, came to America after World War II as a child with his father, a British sailor. John received his Ph.D. and became a professor of computer science at U.C. Berkeley. At Cypress, John's division makes the clocks used to synchronize 20 million personal computers a year. Recently, John's division invented a new chip that will allow us to participate in a rapidly growing market called "USB." That stands for the Universal Serial Bus, the new way in which personal computers are being connected to all of their peripherals (printers, modems, etc.) beginning this year. Recently, we promoted John to the position of chief technical officer.
Lothar Maier, our vice president of manufacturing, came to America from Germany as a child. Lothar began his career at Intel and moved to Cypress for a promotion and the opportunity to work at a start-up company. A decade later, he is now our vice president of worldwide manufacturing, entrusted with 1,067 jobs at six manufacturing sites.
Emmanuel Hernandez is our chief financial officer. Based on outstanding performance, he was relocated to the U.S. from the Philippines by his former employer, National Semiconductor, Silicon Valley's second-largest chip company.
Tony Alvarez, our vice president of research and development, immigrated as a child in 1961 from Castro-controlled Cuba. He directs a force of 113 engineers in Austin, San Jose, and Minneapolis that develop our most advanced silicon technologies.
Jose Arreola, our chief scientist, works for Tony, and has the direct responsibility for our advanced semiconductor technologies. Jose's group just brought our largest chip into production-a memory containing 26.2 million transistors. Jose immigrated to the U.S. from Mexico in 1974 to get his Ph.D. in transistor physics. He entered America on an employment visa, and later he became a citizen. Jose manages a group of 30 people, 80% of whom have postgraduate degrees-two-thirds of them legal immigrants. If you remember Pat Buchanan's last campaign, he derided immigrants, calling them "Jose." I can state unequivocally that our Jose has made 2,011 Americans better off. Our top transistor physicist, Jeff Watt, is a member of Jose's team. He is a Stanford-educated Ph.D. who immigrated from Canada.
Cypress also has immigrants on its board of directors who have not only helped our company but literally changed the course of business history.
Pierre Lamond, our chairman, received an advanced technical degree in France. He was later recruited to the United States to work at Fairchild Semiconductor, the progenitor of virtually every important Silicon Valley company, including Intel, National Semiconductor, my company, and hundreds of others. Pierre was a founder of National Semiconductor, which employs 13,000 people.
Pierre is currently a venture capitalist whose firm, Sequoia Partners, was instrumental in founding Apple Computer (8,000 employees), biotechnology pioneer Genentech (3,200 employees), Cypress, and more than 200 other high-tech companies with a total market capitalization of $175 billion and more than 150,000 total employees. In addition to his board position at Cypress, Pierre serves as the chairman of Vitesse Semiconductor, the world leader in digital gallium arsenide integrated circuits, specialized semiconductors used to transmit data on the Internet at the astronomical rate of 250,000 typed pages of information per second.
Cypress director Eric Benhamou fled with his parents to France in 1960 to escape the Algerian civil war, before moving to the U.S. to get his M.S. at Stanford. Eric went on to become the President and CEO of 3Com, the world's leading supplier of data, voice, and video communications technology for the exploding Internet. 3Com has 100 million customers worldwide and employs 13,200 people. It is highly unlikely that any e-mail anyone on this committee receives or sends does not pass through at least one 3Com product.
Without question, Cypress's 2,771 jobs and its success in Silicon Valley could not have happened without the immigrant engineers who help run the company and serve as board members.
Perhaps the most-often cited example of an immigrant who brought value to this country is Hungarian refugee Andy Grove, the founder and CEO of Intel, the world's largest semiconductor company. Intel produces the processor chips for 80% of the world's personal computers, and has more than 50,000 employees.
Numbers tell only part of the story. If it were not for the immigration policies that allowed them to come to America, Lamond, Benhamou, Grove, and the hundreds of other immigrant executives in Silicon Valley, these leaders would be applying their skills to the benefit of our competitors overseas. Consider the net effect to the American economy if these men had been excluded, inventing instead the products and technologies that helped to build a European Intel, or a Taiwanese Apple, or a Korean 3Com. What high-technology advantage would America have if Europe had been the birthplace of the microprocessor, or the personal computer, or the driving force behind the Internet?
My point is that it is absolutely preposterous to claim that any of these men took jobs away from native-born Americans. We would lose jobs without our immigrant talent. The logic of those who claim otherwise, including high-ranking members of the Clinton administration here today, borders on absolute folly.
Meanwhile, consider a more quantifiable measure of the economic value provided by immigrants, this one involving rank-and-file Cypress engineers. Cypress has 470 engineers and 2,771 employees worldwide. That means each engineer creates jobs for five additional people who make, administrate, or sell the products developed by our engineers.
A disproportionate number of our R&D engineers-36.6%-are immigrants, about the average at high-tech companies. It follows that had we been prevented from hiring those 172 immigrant researchers, we would have failed to create about 860 other jobs-most of which are held by native-born Americans. Immigrants do not take jobs away from native-born Americans, they create new jobs for them at a high rate.
Meanwhile, it is important to recognize that only two of Cypress's six immigrant vice presidents and directors relocated here specifically to take a job. The other four job creators-including our vice president of research and development and our chief technical officer-came to America as children. Obviously, I would oppose strongly the linking of H1-B quota increases with a reduction in family immigration. It would be a transparent political maneuver to pit immigration groups against each other and kill the H1-B cap increase.
If we believe that letting highly skilled people into America will make all of us better off, then we should not tell those who relocate here, "You can come to America, but you must leave your family behind." We cannot attract top-flight engineers if we must tell them they will be prohibited or hindered by U.S. law from sponsoring close family members to join them in the U.S.
Our international competition could receive no better gift than for Washington to reduce the number of skilled engineers available to American high-tech businesses. During the 1980s, Japan battered the U.S. semiconductor industry. Now the U.S. leads Japan. That turnaround is due partly to an acute shortage of engineers in Japan because of its strict limits on immigration. On a daily basis, our competitors in Tokyo scheme to stop the momentum of the American semiconductor and computer industries. Even if they tried, they could not come up with a better plan than to cut off our supply of critical engineering talent. Unfortunately, the United States government was their ally in 1997 when it did just that.
High-tech resembles football in that the team with the best players wins. It appears that we are turning away the best players because we are unwilling to let a very small (3% of total immigration) additional number of highly talented people into the United States. We even turn many of those immigrants away after they have been educated in our colleges and universities!
Last year, the U.S. Labor Department interrupted four key projects at my company, Cypress Semiconductor: Our most advanced CMOS process technology, a memory chip for Internet applications, a microcontroller chip for personal computers, and our enterprise manufacturing control system.
The reason? U.S. high-tech companies hit the annual H1-B visa cap of 65,000, causing us to temporarily lay off highly skilled technology workers waiting for their visas. As a result, these projects will delay the sale of millions of new chips and the creation of hundreds of downstream manufacturing jobs. We also have 16 other projects backlogged due to engineering shortages.
Attached to my testimony is a list of the projects that are currently backlogged at Cypress (see Appendix D) for lack of engineering resources. These projects include more USB chips, computer memories, communications devices for cellular phones, and special memories used to receive information from the Internet.
Cypress cannot find enough skilled workers to fulfill its maximum growth potential. Multiply our troubles by the thousands of semiconductor, system, software, computer, and networking companies in Silicon Valley, and the true proportions of this crisis emerge. The Information Technology Association of America, in association with Virginia Polytechnic Institute and State University, estimates that there are 346,000 highly skilled positions going unfilled in U.S. companies! More than 70% of the companies surveyed by ITAA identified this problem as the leading barrier to their growth and competitiveness.
The Clinton-Gore administration portrays itself as a friend of Silicon Valley, yet on issue after issue, from securities litigation, encryption export, Internet regulation, and now H1-B visas, it has turned its back on high-tech companies. Today, when Silicon Valley companies are in desperate need of increased access to skilled professionals, the message we have heard from the administration on the H1-B issue is simple: "Drop dead."
Yes, "Drop dead." I refer specifically to the intransigent position of Commerce Secretary Daley that it is "not feasible" to increase the cap on H1-Bs, "Don't even talk about it," he says. If the Administration holds to this position, it should forget about portraying itself as anything but an enemy of Silicon Valley. Appealing to populist nativism by claiming these highly skilled individuals will be taking away American jobs may have short-term political appeal, but the implications to the high-technology industry are too severe to give in to politics.
I cannot see why the administration would lock onto a position that prevents companies from hiring skilled foreign nationals beyond the current, arbitrarily imposed 65,000 cap (out of 1.1 million total immigrants). If successful, it will have achieved only one objective-to drive the job creation of high-tech companies progressively offshore. Consider the billions spent by our government-often inefficiently-on job-creation programs, why would the administration not take me up on my offer: For every extra immigrant engineer we can hire at no cost to the taxpayer, we will create five new jobs?
The committee should also know that most of our H1-B hires are individuals of either Asian-Pacific or Hispanic descent, just like millions of other California immigrants. Neither these individuals nor anyone who comes through the family immigration or refugee system should be maligned unfairly for "taking away American jobs." H1-B immigrants work hard and honestly, and they create innovation and wealth in our society. I treat my employees with respect, and I hope others will, as well.
Bad argument #4: Washington's immigration policy saves American jobs.
In response to the job openings we were not able to fill in Silicon Valley, we started our first remote design center in 1987, in Starkville, Mississippi. After that, we added design centers in Washington, Colorado, and Minnesota. But eventually we opted to expand outside the U.S.-first with an acquisition in London, England, and then with startups in Cork, Ireland, and Bangalore, India. We are being forced by government policy either to stifle our growth or to fill the jobs offshore that we cannot fill here.
Bad argument #5: Immigrants work for less money, reducing the wages of other workers.
This common argument, usually summed up as "High-technology industries require a large international pool of cheap workers to lower costs," is absolutely untrue.
San Jose's immigrant population is among the nation's highest. Yet competition for workers here is so intense that the average wage in 1996, the most recent year for which Labor Department figures are available, was $44,819, compared with the national average of $30,250. Only New York, another highly concentrated immigrant center, beat out San Jose. According to a 1997 study by Cato Institute economist Stephen Moore, "Immigration and the Rise and Decline of American Cities," the 1990 per-capita of America's top-ten high-immigrant cities was $14,096, versus $11,806 for the 10 cities with the lowest concentration of immigrants. This study was based on the accurate demographics available in the 1990 census. If immigrants supposedly lower salaries, why do the data show exactly the opposite?
Higher immigration levels seem also to correlate with lower unemployment: According to a 1994 Manhattan Institute study, "Strangers at our Gate-Immigration in the '90s," the 1960-1991 median unemployment rate in the 10 states with the highest immigrant presence, including California, was 5.1%, a full 1.5% lower than the 6.6% unemployment rate in top-10 low-immigration states. Conversely, the 10 states with the highest unemployment rate in the 1980-1990 timeframe had only a 1.56% immigration population, versus the U.S. average of 8.5%. If immigrants take our jobs, why is unemployment lower where they concentrate?
We enjoy a low unemployment rate in immigrant-rich Silicon Valley. In the broader U.S. electronics sector, the average unemployment rate of electrical engineers scraped bottom at 0.4% in the 1997 fourth quarter, according to Robert Rivers, editor of the Engineering Manpower newsletter, as quoted in Electronic Engineering Times.
This record low figure virtually assures all engineers of receiving top dollar. It is absurd to suggest, as do some anti-immigration zealots, that a two-tiered salary structure exists, with foreign-born engineers earning less than native-born engineers of comparable age and education levels. If a company tried to pay foreign nationals less, in addition to breaking the law it would destroy itself as its engineers quit to go elsewhere. In Silicon Valley, almost any engineer in any company on any given day can quit and have another job offer by the end of the same day.
The competition for workers is so intense in Silicon Valley that Cypress's average San Jose employee-excluding me and the vice-presidents-earns $81,860 a year including 19% benefits, as of our last paycheck. The Cypress immigrant managers and vice presidents I described earlier all earn six-figure incomes. Whose pay are they holding down? And with an unemployment rate of 0.4%, where are the out-of-work American engineers that the foreign talent is displacing?
Bad argument #6: Only government can strike a "correct" balance between the economic and social costs and benefits of immigration, safeguarding the interests of "real" Americans.
I always cringe when Washington tries to manage anything. The management prowess demonstrated by the House Bank and White House Travel Office scandals immediately come to mind. Consider some of the ridiculous immigration-control proposals that have circulated in Washington in recent years.
One proposal would have required companies to run identity verification tests on employees to get government clearance to hire. Such tests would have relied on personalized birth certificates with a fingerprint or other biometric data such as the retinal pattern in our eyes. The system would have been enforced by yet another inefficient government bureaucracy. Imagine the economic gridlock that would result from having to phone Washington for permission to make a job offer. And even if there were just a 1% error rate in the proposed national employment database, 650,000 jobs a year would have been denied by "mistake" -a government-caused human tragedy.
Another preposterous proposal was for the United States to send immigrants home for three years after they had completed their U.S. college educations. In other words, we were advised to burn millions of dollars educating immigrants (currently one-half of all new U.S. Ph.D. engineers are immigrants) and then send them back to their native countries, where they would have made our foreign competitors stronger! Winbond Semiconductor, a Taiwanese chip maker just penalized with duties by the International Trade Commission for dumping in the U.S., has a CEO with a Ph.D. from Princeton.
This year, "trial balloons" have been sent up to see if industry would accept government controls on layoffs in return for relief on immigration. This bad idea sounds like the "great" French employment control system that has produced consistent double-digit unemployment by restricting the abilities of employers and employees alike to make free-market choices. My company actively avoids hiring permanent employees in countries where we face unreasonable government restrictions.
In no other area of the national debate have I seen the wholesale abandonment of data, logic, and reason as I have in the debate on immigration.
America's legal immigrant population represents only 8.5% of the total U.S. population, well below the 13 % levels recorded consistently between the 1860s and the 1930s. Immigrants add less than 0.4% to our population yearly. Our immigrant population is low-about half that of Canada, Australia, Switzerland, or New Zealand. Add to these statistics the documented value that immigrants provide to all Americans, and our response to the immigrant "problem" should be obvious.
The National Science Foundation reported in 1995 that although immigrants represent less than 10% of the U.S. population, they make up almost 30% of scientists and engineers with doctoral degrees engaged in research and development. Cypress is a microcosm of that big picture. As of this writing, 36.6% of our San Jose engineers-read job creators-are legal immigrants. On a bulletin board in our research and development division, push pins on a world map identify our employees' home countries, including England, France, Mexico, Laos, India, China, and Poland. There are even pins representing engineers from Mongolia, Afghanistan, and Ghana.
I have spoken in other Congressional forums about the American Dream-that every generation will enjoy a higher standard of living. But there's another part to that Dream: that America's strength derives from our melting pot of diversity, and that diversity builds wealth rather than destroying it.
U.S. immigration is well-controlled. Raising overall immigration quotas by only 3% of total immigration, specifically to bring in valuable new engineers and scientists, would benefit all Americans. We should enjoy our diversity and spend our time solving the real problems of the country.