NEW YORK (CNN/Money) - Intel CEO Craig Barrett says the U.S. government needs to do more to support the struggling U.S. technology industry in order to stave off competition from emerging markets such as China and India.
Although the world's largest semiconductor company increased its sales outlook for the third quarter in August, citing signs of improved demand for desktop and notebook computers, Barrett did not sound incredibly upbeat about the U.S. tech sector's future in a keynote address to the Executive Council of New York's Ten Awards Thursday evening.
Barrett, quoting New York Yankee Hall of Famer Yogi Berra, said "the future ain't what it used to be." He added that the biggest threats to U.S. technology companies are no longer from nations such as Japan and Germany, but emerging economies such as Russia, China and India. He joked that the only growth industry in Silicon Valley right now is gubernatorial candidates.
More and more tech companies are relying on outsourcing to cut costs and in many cases, tech jobs are moving overseas due to cheaper labor costs. Barrett said one way that the U.S. could stem job losses would be by improving education.
He called the K-12 system in the U.S. one of the world's worst and said that other countries like China and India are gaining an edge not merely because employees work for lower wages but also because of a stronger educational background in those nations.
More subsidies, less interference on options wanted
In another jab at the federal government, Barrett said there needs to be more subsidies for research and development efforts in the science and technology field. He pointed out that the three industries that receive the most assistance from the government are agriculture, steel and soft lumber.
"Why does the U.S. subsidize three industries of the 19th century and no industries of the 21st century?" Barrett quipped. The remark was met with loud applause by the audience of New York area business leaders.
Finally, Barrett went on the attack against the Financial Accounting Standards Board and Securities and Exchange Commission for their efforts to force stock options to be expensed.
This issue is the source of intense debate on Wall Street. Some high profile investors, most notably Warren Buffett, maintain that options are a form of compensation and therefore should be treated as an expense on companies' profit and loss statements.
But many tech executives, including Barrett, claim that valuation models for stock options are flawed and that expensing options would create a drag on earnings. Barrett repeated that mantra Thursday evening, saying that if options had to be expensed, it would cause the effective elimination of broad based options grants for tech employees.
And that, Barrett argued, would make it even tougher for U.S. tech companies to attract skilled tech talent since other countries, including China, are promoting the use of stock options in order to attract higher quality employees.
"I'm trying to figure out why the Communists in China think this is a good idea and we think this is a bad idea," Barrett said.
Still, other tech companies have found a solution to that problem. Microsoft, for example, announced in July that it would stop awarding employees stock options and would instead give them restricted stock as a form of equity compensation.