Once the undisputed leader, America is now under assault from countries worldwide. How did this happen, and will the U.S. be able to fight back?

In the history of the U.S. technology industry, 2004 will be remembered as the year that outsourcing hit home.

Consultancy Gartner Group figures that U.S. tech companies will send 500,000 jobs overseas this year — and indeed, hardly a week goes by without a major U.S. tech outfit announcing a new R&D center in Asia. As outsourcing has begun to hit high-salary jobs in programming and tech services, the trend is giving rise to a wider fear — that U.S. dominance in high tech is starting to wane.

For half a century, America has reigned supreme in technology. U.S. research institutions have been the best on the planet, and the U.S. capital-formation machine has turned their discoveries into one breakthrough after another in transistors, communications gear, computers, and just about every other key high-tech field. Players such as IBM, Intel, Hewlett-Packard, Texas Instruments, Microsoft, and General Electric have risen from this culture to dominate world markets in their businesses.

Now, life at the top suddenly seems a lot less lonely. In fact, although the U.S. is still the undisputed champ in technology overall, in a handful of key areas it already appears to be falling significantly behind foreign competitors.

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