Chip war lays bare Korea’s weak talent retention

Industry

Published: 28 Mar. 2024, 19:31

Chip war lays bare Korea’s weak talent retention

An employee walks in front of the logo of TSMC at its headquarters in Hsinchu, northern Taiwan, November 19, 2015. [REUTERS/YONHAP]

Recruiting and scouting chip talent has become a top priority for global chipmakers as the boundaries between designing and manufacturing, once strictly segmented, are increasingly becoming blurred amid cutthroat competition to gain an upper hand in the industry.

The latest attempt by Micron to scout a former SK hynix engineer who was in charge of high bandwidth memory (HBM) chips proves the case. The move was ultimately blocked by a Korean court.

The convention that the United States specializes in chip design, Taiwan in manufacturing, Korea in memory chips and Japan in equipment and components has now become a thing of the past.

Intel, backed by a U.S. subsidy, is delving aggressively into chip manufacturing, while Japan is joining forces with Taiwan to ramp up its manufacturing capabilities.

In such a scenario, observers say it is crucial for Korea's chipmakers to overhaul the working environment in order to retain domestic talent and attract more from overseas beyond simply increasing their paychecks.

A Samsung, Texas, South Korea, and United States flag hang in front of the Samsung semiconductor chip plant in Taylor, Texas, USA, 02 January 2024. Samsung's semiconductor chip plant, which was supposed to be finished in 2024, will not be finished until 2025. The new plant will employ 2,000 people, and the cost of the project is $17 billion. [EPA/YONHAP]

Korean chip talent coveted globally

To realize the American ambition of making chips at home, the country is in need of technicians who know how to manufacture logic chips with complex designs. That is why Intel, which has recently dived into the business, covets Korean talent.

Samsung Electronics is the No. 2 player in the contract chip manufacturing business after TSMC.

"I have multiple students working for either Samsung or SK hynix who recently said they have been scouted by American chip companies," said an engineering professor at a Korean university who spoked on condition of anonymity.

"And they are seriously considering the option because it is a good chance to educate their children [in the United States]."

The leakage of talent is not confined to big companies. Suppliers for Samsung and SK hynix are encountering a similar predicament.

"There is an increasing number of cases where employees who were in charge of working with Samsung or SK hynix have moved to overseas companies," said a source from a components firm.

"We are considering raising our pay and expanding recruitment."

Japan is also rolling out full-fledged efforts to bring in talent.

"The biggest problem at the moment is a lack of engineers," said Joe Wu, CEO of JSMC, a joint venture between Taiwan's PSMC and Japan's SBI Holdings, to local reporters last month.

"We are going to have engineers dispatched from Taiwan and also send our own engineers to TSMC to receive training."

Talent retention was key for TSMC and Taiwan

TSMC founder and former CEO, Morris Chang, speaks during a forum in Taipei, Taiwan, on March 16, 2023. [AP/YONHAP]

Taiwan, home to TSMC, the immovable No. 1 player in the contract manufacturing realm, is also keen on retaining its talent.

The average salary of Taiwanese workers is only 65 percent of what Koreans are receiving, according to recent Korea Trade-Investment Promotion Agency figures. But for those committed to the chip industry, their salaries have risen by 22.9 percent for the past five years, far exceeding the average of 9.3 percent in the country.

The median salary of Mediatek and TSMC's non-managerial employees in 2022 came to 3.8 million New Taiwan dollars ($119,000) and 2.4 million New Taiwan dollars, respectively, four to five times the country's average.

Morris Chang, founder of TSMC, said last year that the secret behind Taiwan's catapult to the top spot in the chip industry lies in its low turnover rate.

The turnover rate for the U.S.' chip industry is very high at 15 to 20 percent, Chang had said, adding that such a high rate can never lead to success in the manufacturing industry.

The turnover rate for TSMC came to 6.7 percent in 2022, while that of Samsung Electronics stood at 12.9 percent.

Overhaul needed in Korea

In Korea, the chip engineering industry is not the most popular academic field among students because there is a pervasive belief that the career of an engineer ends in their mid to late 40s. That is why those with the highest grades have opted for a medical degree rather than engineering for the past 20 years.

"The lifespan of a Korean engineer is so short," said Kim Jung-ho, an electrical engineering professor at KAIST.

"There needs to be an overhaul, like sending those who have worked for more than 10 years back to school to earn additional degrees or re-educating them on new technology."

Another problem lies with companies shunning the recruitment of new engineers and instead opting for experienced ones.

"A solution to this could be offering on-site education for two years for graduate school students," Lee Hi-deok, an electrical engineering professor at Chungnam National University.

"Industry-academia cooperation should expand from the current level, which is highly focused on schools in Seoul or Gyeonggi, to universities in outer regions as well."

The compensation system could also improve, critics say.

Last year, Samsung Electronics employees in the semiconductor business received no bonus due to a plunge in sales.

In an industry structure where ongoing technological development is reflected in a company's performance at least two to three years later, gauging an incentive rate solely based on the current year's performance is seen as unreasonable by many.

"The core of Silicon Valley's virtuous cycle is substantial rewards for employees," said a former executive of Samsung Electronics on condition of anonymity.

"Korean companies should have a differentiated rewards system for employees depending on occupation and performance in order to retain talent in the long term."

BY SHIM SEO-HYUN, LEE HEE-KWON [jin.eunsoo@joongang.co.kr]