U.S. EE forms outsourcing firm in Russia

SANTA CRUZ, Calif. — While some U.S.-based chip designers fear losing their jobs to outsourcing, Linc Jepson believes the practice will create jobs. When he lost his ASIC design job in Silicon Valley in 2002, Jepson moved to Russia, where he recently launched a startup that offers IC design services. And he says he'll need to hire one engineer in the United States for every five he hires in Zelenograd.

Creating a chip design firm in Russia may sound like an odd career choice, especially since Jepson started working for well below the U.S. minimum wage at his first design job in that country. But for a young, single guy with a BSEE and a BA in international relations from Tufts University, and several years of Russian-language study, it seemed like an obvious choice during the Silicon Valley downturn.

Today, Jepson and several Russian colleagues run 74ze, an outsourcing company located in Zelenograd, an emerging high-tech center on the outskirts of Moscow. Jepson returned to Silicon Valley in July — his first visit to the States in more than a year — to find contract work for the new company and to scout U.S.-based engineers who could serve as project liaisons.

Jepson described his new venture — as well as his life in Russia — with enthusiasm. "I always wanted to work abroad before I got married and settled down," he said. "I'm merging [the expertise from my] two degrees and doing engineering work abroad. It's the most exciting thing I've ever done."

Jepson's odyssey began in adolescence, with a high school course in Russian. "I thought it was so exotic," he said. "I jumped at the chance, and I was hooked." He studied the language for two years in high school and for a year and a half in college.

Jepson headed out to Silicon Valley in 1997, where he worked for an ASIC design startup, Believe Inc., that was developing a computer graphics ray-tracing engine. Then Believe folded, leaving Jepson jobless. After a brief stint at Transmeta, Jepson traveled in 2002 to Minsk, Belarus, where he studied Russian at a linguistic university for eight months.

Jepson then moved to Zelenograd and went to work for a microprocessor development company there for about a year.

"I had a blast," he said.

Good talent, low costs

One thing that Jepson noticed during this period was the skill level of his Russian engineering colleagues — skills he described as "comparable to or better than those of the people I've worked with here [in the States]." Yet typical engineering salaries in Russia are only in the $24,000 to $30,000 range, he said.

Change was also coming to Zelenograd, a formerly closed Cold War city of 100,000. Recently, Jepson said, a number of homegrown engineering operations have sprung up in the area, and companies such as Motorola and Samsung have set down roots. Intel has a large design center not far away, in Moscow, as does Cadence Design Systems, Jepson noted.

And Unique ICs LLC, a Zelenograd-based chip-design services house, is looking to take its Spice simulation technology to the commercial market under the banner AvoCAD, with plans to market the $100,000 simulator in the United States.

IC design activity in Russia is indeed growing, after a drop in the 1990s, noted Jaswinder Ahuja, corporate vice president at Cadence Design Systems Inc. But he added that the amount of IC design work being done in Russia is still lower than the volume going to China or India. "The costs are comparable [in Russia], but the level of expertise is a bit behind."

Jepson described Zelenograd, which means "green city," as a "quaint little town" thick with trees. It's a peaceful place, he said, with trolley buses, stores, theaters and gyms — and now, increasingly, high-tech activity. "It would be premature to compare it to Bangalore [in India]," he said, "but it's kind of a technology hotbed."

One side effect of the growth, he noted, is that housing prices have just about doubled in the past year. A one-bedroom apartment costs around $40,000 to purchase, or $250 to $300 a month to rent. Jepson lives in a two-room apartment.

He and his colleagues launched 74ze after noting the wealth of technical talent available in the Moscow area. But it's difficult for U.S. companies to tap into that reserve, Jepson noted, because of language and other communications barriers. The solution: an outsourcing firm with an American project manager who lives in Russia and can directly oversee the work there.

Thus far, 74ze has six engineers working on several projects, including one that involves a software tool for ASIC development. Jepson said he has a "pool" of 20 or 30 more engineers waiting for projects. "I'm having no trouble finding spectacular guys who would be earning great salaries if they lived here," he said.

Seeking U.S. engineers

But management is hard to find, so 74ze hopes to hire U.S.-based engineers who can serve as project leaders. Those engineers would work directly with U.S. customers, integrate submodules sent by the Russian team and make sure the customer gets what's required. In that sense, Jepson noted, 74ze has the potential to create U.S. jobs rather than take them away.

For now, 74ze is focusing on design work but has not ruled out verification. Jepson said the company concentrates on microarchitectural definition, RTL design and synthesis. He added that he's getting requests for circuit designers to work on libraries, I/Os and memories.

While some Russian engineers already have access to EDA tools, 74ze doesn't license tools and expects the customer to provide the licenses. Russian engineers, he noted, are well-trained in the use of EDA tools. Cadence, for one, has a training program at the Moscow State Institute of Electronic Technology in Zelenograd.

In his discussions with potential U.S. customers, Jepson has found that lower engineering cost is not the motivation for outsourcing. "The big issue for all managers is, 'Will this project get done, and will it get done right?' Cost is secondary." Nonetheless, 74ze can offer clients a significant cost savings, Jepson said.

Will outsourcing to Russia or other countries take away U.S. jobs?

"I don't think so," Jepson said. "Managers will always look to a known quantity, which is the engineers they have in-house. As things go offshore, we'll be adding jobs. For every group of five engineers over there, I'd like to have an engineering project lead over here for them."

Jepson is preparing to head back to his Zelenograd apartment at the end of July. That's home now.

"I don't know if I could call it permanent, but for right now it's what I'm doing, and I'm loving it," he said.