Monday, June 18, 2007

The bunnie and the chumby

Hardware hacker Andrew "Bunnie" Huang has a blog. Huang grew up in Michigan and earned SB and PhD degrees from MIT. Well known for his reverse-engineering exploits (e.g., Xbox), he co-founded hardware startup Chumby (their product is a low-cost wifi data device) and is working in Shenzhen to set up production.

I highly recommend the following posts from his blog.

On the US technology education deficit.

...I was chatting with UCSD high speed integrated circuits professor Jim Buckwalter about the nature of the graduate student applications he has received.

The statistics were astonishing. Of the thousands of applicants, only 80 were from the US. To put this in perspective, he had more applicants with the surname “Lee” alone than he had domestic applicants. And UCSD engineering is no slouch; according to the rankings they are #11 in engineering overall.

...The enormous disparity in domestic applicants to higher education in crucial fields such as high speed circuit design is a bit disturbing. With numbers like these, it is inevitable that the US will lose its edge in technology. I guess it wouldn’t be as bad if these foreign students actually stayed in the US and started companies, but my experience in China has shown that just about every company I talked to had US-educated management from schools like Berkeley and Stanford.

At the SEG electronics market in Shenzhen (what Akihabara used to be).

Ten years ago, Akihabara was the place to be for the latest electronics and knick knacks and components. I’m convinced the new place to be is the SEG Electronics Market in Shenzhen (although to be fair I heard there is a competing market in Korea that’s supposedly even better–the Japanese test-market their stuff there even before they try it in Akihabara!).

...Chips that I couldn’t dream of buying in the US, reels of rare ceramic capacitors that I only dream about at night. My senses tingle, my head spins. I can’t supress a smirk of anticipation as I walk around the next corner, to see shops stacked floor to ceiling with probably a hundred million resistors and capacitors.

...Oh my god! Sony CCD and CMOS camera elements, I couldn’t buy those in the US if I pulled teeth out of the sales reps–and behind the counter, the guy sometimes has a datasheet–ask for it. A stack of Micrel regulator chips–over there, a Blackfin DSP chip for sale. The smell, the bustle, the hustle. It’s the ultimate electronic component flea market. Over here, a lady counting 256 Mbit DRAM chips…trays of 108 components, stacked twenty high, a row of perhaps 10 of them–she has the equivalent of Digikey’s entire stock of DRAM chips sitting right in front of me.

Reflections on capitalism in China: electronics manufacturing, basic labor economics, efficiency, corruption, etc. (See also Shenzhen diary.)

Minimum wage In Shenzhen, the minimum wage is about $0.60/hour. However, there is a very competitive labor market in China–there is a shortage of workers and mobility between factories is unimpaired by employment agreements. Therefore, employers must provide a very competitive benefits package for their employees, which typically includes dormitory housing, food, medical care, schooling, and day care; there are no retirement or unemployment benefits.

...workers have an 8-hour day, 5 days a week, and employers are required to pay 1.5x overtime and 2x on weekends. As far as I can tell, employers honor this. So in the end, these laborers earn a discretionary income of at least $100 per month, or $1200 per year. This is surprisingly comparable to the $2,075/yr discretionary income of US households that earn under $50,000 (link), which is probably the correct reference point for comparing minimum wage workers in both countries. I haven’t even adjusted for the cost of living difference between China and the US–but let’s just say 100 RMB goes a loooong way if you are just buying food...

...The fully-burdened rate of a worker in China is around $1.80 it seems–this is the rate that the employer pays once all the benefits (free food, housing, medical care, day care, etc.) are factored in. At these wages, laborers are cheaper than pick-and-place machines. In the US, you typically pay between $0.05-$0.25 per component placed on a PCB with a pick and place machine in low volume (100’s to 1000’s).

...In the end, I guess the trillion-dollar question is: will the Chinese economy surpass the US? I think, after being on the ground there and seeing where things are going, the answer is an unequivocal yes. While their current position is beneath the US, the first derivative is positive, the second derivative is also positive. Even if the economy were to start cooling down today (second derivative goes negative), I think they have enough inertia to soundly position themselves above the US for total GDP in about a decade or two. [OK, that's off a bit, but Bunnie is an engineer, not an economist. See here for what I think is a more realistic estimate.]


smekhovo said...

I think he's right.
15%+ nominal growth for 10 years, factor in a chunk of RMB appreciation vs. $, China will easily exceed the US.
And the real growth rate may actually be even higher, if you look at its components. It's not for nothing that they keep making upward revisions.
Thanks for the link btw, very interesting.

steve said...

It might happen as you say, but I think that's on the optimistic side.

Goldman says 40 years to surpass US total GDP, but that's not PPP-adjusted.

If currency revaluation adjusts for most of the PPP factor, the US-China growth differential has to make up a factor of 2 or so. That could happen in 10 years with, e.g., China at +10% and the US at +3% growth rates. More realistically, China could slow to +7% and it would take almost 20 years.

And of course this assumes no social unrest, environmental meltdown, energy crises, wars, etc.

smekhovo said...

It's hard enough to calculate GDP itself without worrying about the extra assumptions that go into a PPP adjustment :-)
4 years ago, I suppose almost no-one thought these rates of growth could last for 15 years - but they've lasted for 5 already.

Anonymous said...

bunnie is a simple-minded idiot that like to give craptalks

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