The chipmaking pay revolution buys time, but will not solve scarcity of engineers

{"text":[[{"start":10.29,"text":"Bankers have long been the ones that took home Asia’s biggest bonuses. Now, an unlikely group is catching up: chip engineers. But unlike bankers, whose rewards tend to rise and fall with market cycles, the surge in chip sector pay reflects a structural shift in how the world is valuing technical talent."}],[{"start":35.18,"text":"A pay revolution has unfolded in the chip sector this year. South Korean chipmaker SK Hynix scrapped the cap on its profit-sharing plan, and has also paid bonuses worth a reported 1,500 per cent of monthly base salary, or about three-quarters of a year’s pay in a single payment. Bonuses that are close to the base salaries are common in the finance industry, but at South Korean conglomerates they are rare as rigid pay structures and seniority-based rewards have long prevailed. Even so, some local employees were reported to view the payout as insufficient, suggesting that record bonuses have yet to satisfy staff expectations fully. "}],[{"start":87.58,"text":"The dissatisfaction underscores how fierce competition for engineers has become and how pay alone may not solve the shortage. That tension is growing amid record investment by global chipmakers to expand production capacity. They are planning expansive new facilities, with total investment expected to reach nearly $1tn between 2023 and 2030, according to McKinsey. Even before this wave of expansion, job postings for chip-related technical roles had been surging with the talent gap for engineers in the Asia-Pacific region, excluding China, expected to exceed 200,000."}],[{"start":134.63,"text":"The shift in pay culture in South Korea is already influencing how young professionals choose where to work. SK Hynix has overtaken local peer Samsung Electronics as the most desired workplace among Korean college graduates in Incruit’s survey this year, with two-thirds citing its remuneration system as the main draw. Samsung, struggling to keep pace with its rival, unveiled a new performance-linked stock option scheme in October to stay competitive."}],[{"start":null,"text":""}],[{"start":167.82999999999998,"text":"In Taiwan, similar dynamics are unfolding. The island’s chipmakers have been struggling with a shortage of about 34,000 skilled workers as of May. The gap extends beyond the chip engineers to many of the sector’s core processes, from research and development and production to quality control and facility operations. These roles require highly specialised expertise and round-the-clock shift schedules to keep the plants running 24-hours a day, which make them less appealing for younger workers."}],[{"start":208.32,"text":"As a result, major chipmakers including Taiwan Semiconductor Manufacturing Company and MediaTek have been raising pay in recent years to stem talent outflows, with average employee packages up about 45 per cent over the past five years at TSMC. Employee profit-sharing and stock incentive programmes, along with one-off cash bonuses and performance-linked rewards, are being used to keep engineers from being lured to China or overseas fabrication facilities (fabs). TSMC says its “global campus recruitment programme targets recent graduates and offers priority interviews and competitive, above industry-standard compensation packages”."}],[{"start":260.12,"text":"The company also emphasises flexible working hours and international support, saying its “employee welfare systems far exceed legal requirements and we share our operating results with staff to ensure they benefit from the company’s success”."}],[{"start":null,"text":"

Chipmakers are increasingly drawing on the same limited pool of engineers to set up new facilities abroad

"}],[{"start":282.61,"text":"China is waging its own battle, in the process intensifying the global fight for talent. As it pushes to reduce its reliance on foreign technology, Beijing has invested billions of dollars in building up local chipmaking capacity. Yet despite ample investment, the real constraint is talent. To fill the gap, local chipmakers and state-backed fabs are offering double-digit pay rises, rapid promotions and generous housing subsidies to lure experienced engineers from Taiwan and Korea."}],[{"start":323.49,"text":"The ripple effects extend beyond Asia. In 2023, TSMC delayed mass production at its Arizona plant in the US by two years, citing a shortage of skilled workers and technicians able to install and operate complex equipment. As chipmakers expand production in the US, Europe and Japan, they are increasingly drawing on the same limited pool of engineers to set up new facilities abroad. The result is a feedback loop in which more overseas fabs come online and the demand for South Korean and Taiwanese talent intensifies, exacerbating labour shortages at home."}],[{"start":372.89,"text":"What began as a cyclical labour squeeze is now exposing a structural fault in the system. Asia’s working age population is shrinking, with both South Korea and Taiwan’s set to fall about 1 per cent a year over the next decade, according to Capital Economics. South Korea’s fertility rate of 0.75 last year, the world’s lowest birth rate, is far below the rate of 2.1 needed to sustain the population. Taiwan’s stands at just under 0.9, which means that in both countries, each new cohort of graduates will be smaller than the last."}],[{"start":418.03,"text":"This raises the question of whether chipmakers can ever fully resolve their talent shortages if there simply are not enough young engineers coming through the system, even with growing bonuses. For now, chipmakers’ focus on higher bonuses and retention schemes may buy time, but will not solve the underlying shortage."}],[{"start":443.36999999999995,"text":"All this suggests that today’s fat payouts are a hint of a new normal. Bonuses once tied narrowly to quarterly profit targets have evolved into retention tools. For veteran process engineers in particular, chipmakers will be forced to pay ever more to hold on to them, just like banks once did to retain their top traders."}],[{"start":469.85999999999996,"text":"An equally dramatic surge in profitability and share prices will help sustain the trend. Both TSMC and SK Hynix reported yet another round of record earnings for the third quarter. Shares in SK Hynix have more than tripled this year, while TSMC has been on an upward trend since 2022."}],[{"start":497.75999999999993,"text":"As AI reshapes the global economy and chip capacity spreads to new countries, the next challenge for chipmakers will be sustaining growth as the scarcest resource becomes people."}],[{"start":525.1399999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1763733321_1778.mp3"}