Engineering Talent Shortage Now Top Risk Factor

Demand is increasing for engineers and related technical fields in the IC industry, but companies are struggling to find enough talent. The problem is even worse in hot new markets such as AI and 5G, where competition is fierce for experienced workers.

The talent shortfall starts with college graduates and professionals in the fields of science, technology, engineering and mathematics (STEM). STEM training spans multiple industries, but it’s a significant problem for semiconductor and equipment vendors. While a shortage of STEM workers will not stop a company’s day-to-day operations, it does affect their ability to fill key positions, replenish an aging workforce, and develop new products and technologies. Longer term, it can hamper the pace of growth for the whole industry, and it can have an impact on the competitiveness of entire countries or regions.

The talent shortfall isn’t a new phenomenon. For years, the IC industry has experienced a shortage of various engineering types, but the problem has gotten worse as companies embark on a hiring binge. In the fourth quarter of 2018, staff/talent shortages emerged as the top risk factor that organizations face globally, ahead of privacy/regulation and rate of change, according to a new survey from Gartner. Talent shortfalls are a concern across multiple sectors, such as financial, industrial and manufacturing, according to the survey.

The semiconductor industry is in the same boat. According to a recent survey from Deloitte and SEMI, some 82% of executives reported a shortage of qualified technical candidates. Breaking that down further, some 60% of companies say that electrical engineering jobs are the most difficult to fill, followed by computer sciences/software engineering (35%), mechanical engineering (35%), computer systems/engineering (30%), and materials sciences/chemical engineering (30%), according to the survey.

Fig. 1: Which engineering jobs are most difficult to fill? Source: Deloitte

Compounding the shortages is a shift toward new technologies and automation. For example, machine learning requires new skills, but there is a shortfall of experts here. In addition, automation in the manufacturing sector is increasing, which means companies either have to retrain workers or replace them.

This is a complicated, multi-layered subject, but it’s clearly a big issue. Last year, the semiconductor industry had some 10,000 job openings that couldn’t be filled fast enough, according to SEMI. “Is there a shortage of people, yes or no? There is only one answer—yes. It’s big time,” said Ajit Manocha, president and chief executive of SEMI.

There are several reasons for the shortfall. “Enrollment in STEM education has fallen, while demand for high-skilled tech workers has increased partly because of the extraordinary growth of popular consumer-facing companies like Facebook, Amazon, Google and NetFlix,” Manocha said. “These companies have captured the imagination of high school and university students and drawn attention away from the semiconductor industry. They are hiring people left and right.”

So the IC industry is competing for talent against companies with global brands and more appeal. Apple, Google, Facebook and others also offer attractive compensation packages. “This has become a big issue for the semiconductor industry in recruiting and retaining talent, making the competition for highly skilled workers much fiercer,” Manocha said.

The IC industry is working on solutions to solve the problem. But for the foreseeable future, the situation will remain an issue with some serious implications. “The IC industry is expected to double in the next 10 years. Without the right workforce in place, the industry will not be able to capture the growth. It’s not going to happen,” he added.

Competing for talent
The IC industry is an engine for economic growth. It paves the way for new and innovative products, and employs thousands of people in all fields.

The work is becoming more challenging and specialized, though. Chip scaling is becoming more difficult and expensive at each node. At the same time, 5G, AI and autonomous driving require new chip architectures and improved reliability. All of that requires talent, some with different skill sets.

“Talent is a-top three or top-five problem facing this industry,” said Dan Durn, senior vice president and chief financial officer at Applied Materials, at a recent event. “Anything else on that list, if we get the right talent, is solvable.”

There are other issues. “The issue is keeping the semiconductor and equipment industry an interesting place to work, so that you have this constant stream of people to keep the business growing,” said Risto Puhakka, president of VLSI Research. “The issue is how you create a stream of talent. It’s not about one year. It’s really about how do I have decades of talent coming in at a steady stream.”

Solving the issue is easier said than done. For decades, the industry has issued numerous reports regarding shortages of engineers and scientists, particularly in the U.S. Many blame the problem on K-12 education, insufficient funding in the field, and waning interest. The same issues apply today.

There is also conflicting data about the subject, with a few saying the so-called “STEM crisis” is overblown. Some believe there are enough students in the pipeline, but they are not interested in STEM. This is particularly true in the United States, so for years, U.S. universities have recruited students from abroad to help fill up their science/engineering programs.

That has provided a large pool of talent, and a recruiting ground for hi-tech companies. Companies also recruit students in Asia and Europe. But there are some alarming trends unfolding here. In 2017, the number of foreign students enrolled at the graduate level in science/engineering at U.S. universities fell by 6%, according to the National Foundation for American Policy.

While STEM is on the decline in the West, others are making gains. China had 4.7 million STEM graduates in 2016, compared 2.6 million in India and 568,000 in the United States, according to the World Economic Forum.

These and other trends have implications regarding a nation’s competitiveness, as well as the rate of expansion by the semiconductor industry into new markets.

“The demand for those talented individuals is a lot broader now than in the past,” said Chris Richard, a principal of strategy and operations at Deloitte Consulting. “If you come out with one of these engineering hard science degrees, you not only have opportunities for those kinds of roles, but you have opportunities to write code at Google or become a product marketing person at Amazon.”

The problem is that there aren’t enough of them to fill the jobs in all of these areas. “We are short on STEM graduates,” Richard said. “It’s a challenge across all industries in the country. Hence, there are discussions around visas and how do you get enough qualified people just to meet the gap.”

This is especially true in the IC and equipment industries, where vendors face various challenges to hire qualified technical talent. “The industry’s workforce development challenge is rooted in four areas: 1) a shortage of students pursuing a STEM education; 2) lack of awareness of the industry and its vital importance in our everyday lives; 3) talent recruitment and retention issues partly because of the big, wildly popular consumer-facing companies; and 4) more restrictive immigration policies,” SEMI’s Manocha said.

Besides the STEM issues, the problem starts with the recruiting process. Semiconductor companies lack brand awareness, which makes it difficult to compete for talent against companies like Apple, Google and Facebook. According to the Deloitte-SEMI survey, Intel is the only IC company listed among the top 15 organizations in terms of brand awareness.

That’s just part of the problem. Job candidates see the IC industry as a mature business that has undergone considerable consolidation. In addition, layoffs are common during downturns. For these and other reasons, retaining professionals is difficult.

“We are struggling to overcome a huge shortage of skilled workers, but at the same time our industry is growing,” Manocha said. “Another issue is the aging semiconductor workforce. Longtime workers with deep knowledge in their fields bring tremendous specialized value to the industry across many disciplines. Replacing these highly skilled workers as they retire places even more pressure on the industry to build and maintain its talent pipeline.”

Wanted: EEs, AI experts
It’s not all doom and gloom. In the U.S., undergraduate degrees awarded in all engineering fields reached a 10-year high with 124,477 in 2017, up 10% over 2016, according to the American Society for Engineering Education (ASEE).

Mechanical engineering topped the list, followed by computer science and electrical engineering, according to the ASEE. The list also includes civil, petroleum and other engineering types. Master degrees were up slightly, while doctoral degrees fell.

Still, companies face the same problem. “There is a shortage of basically every type of engineer. There are so many new products coming out even outside of the AI space. You have 5G and a number of other technologies,” said Dave Fick, CTO of Mythic, an AI chip startup. “It seems like every week we hear about a new startup or a design center. Those, of course, are trying to hire lots of people, so there is tremendous competition for talent.”

The same is true for software. “There is definitely a shortage of good software engineers in the world,” said Aki Fujimura, chief executive of D2S. “There are by now plenty of people who can program. But that’s different from professional software engineering. And that’s different from computer science, which is a more academic discipline.”

Competition for STEM workers is even more fierce in machine learning, which is used in nearly all industries. But organizations face some challenges to deploy it on a wider scale. According to a survey from Forrester, more than 50% of organizations lack the skills to deploy AI/ML/DL hardware.

“There is a shortage of deep learning experts. There is so much competition for strong software engineers, particularly those with iterative optimization experience from any discipline. They are highly sought, creating a void,” Fujimura said.

Then, once you find experts, there are other issues—supply and demand tend to dictate the salary requirements. “For deep learning software engineers, one of the issues is the spike in compensation for those with experience and talent,” he said. “As a management remedy, we need to hire a few (expensive) deep learning engineers to enable and train the existing software and other engineers in deep learning. Therefore, the faster we can train our own staff in deep learning techniques, the better. But when they do get trained, they will be highly sought after, even more than now. As every company goes through this, eventually supply and demand will even out. But in the meantime, there will be temporary insanity in competition for talent.”

Manufacturing issues
In the manufacturing sector, meanwhile, semiconductor companies, foundries and equipment vendors face these and other issues.

Foundry vendors manufacture chips for other companies. At a given company, there are various job openings, including device design, big data, process/integration and yield analysis.

“Along with other industries, at GlobalFoundries, we definitely experience a supply and demand gap as it relates to STEM educated professionals,” said Steve West, head of talent acquisition and human resource operations at GlobalFoundries. “In some markets, our name recognition may not be as immediate as some of our competitors with well-known consumer brands. However, this is changing for us the more we recruit, and especially on college campuses.”

Another issue is that a large percentage of the foundry manufacturing base is concentrated in Asia. Europe and the U.S. have some fabs, but this limits the opportunities for some. “At GlobalFoundries, we find that when it comes to attracting global talent, we have an advantage with our geographic footprint, which includes locations in traditional markets in Europe and Asia, as well as a strong presence in the northeastern U.S.,” West said.

The semiconductor equipment industry, meanwhile, has its own needs. Equipment vendors develop systems, which in turn make the chips.

“We believe there is a shortage of talent, particularly for students and experienced professionals with backgrounds in computer science, machine learning and artificial intelligence,” said Cheryl Gee, director of talent acquisition at KLA. “We find it most difficult to hire algorithm experts, mechanical, optical, research scientists and applications engineers at the mid- to senior- engineering levels in Silicon Valley.”

KLA specializes in inspection/metrology equipment, although the requirements go well beyond hardware. “KLA’s historical competition came from other companies in the semiconductor market. Today, KLA faces competition from companies like Google, Apple, Facebook and startups working on autonomous driving and IoT,” Gee said. “Artificial intelligence and machine learning are integral to many companies irrespective of industry. Although many of our engineers write software and invent new algorithms, most candidates think of us as a hardware company, not as a place for software engineering careers.”

KLA and others have their headquarters in or around Silicon Valley, so it’s sometimes difficult to recruit candidates to move to this area due to the price-prohibitive real estate market, according to Gee.

Others face similar challenges, although each company is different. “Veeco’s technology goes beyond front-end semi and lithography into compound semiconductors. So, we also look for the best and brightest in the optics and photonics arena as well as materials experts,” said Brenden Wright, head of global talent acquisition at Veeco. “There is a shortage of talent across all business functional areas, but even more so in the highly technical areas like marketing, engineering (electrical, mechanical, software, and systems), and technology/process development.”

That’s not the only issue. “Unemployment is at or near historic lows, making this a candidate’s market,” Wright said. “We see candidates now who often have multiple options from which to choose and sometimes this choice is not limited to SEMI companies, but span different industries.”

Searching for solutions
Clearly, companies face several challenges, but are there are no simple answers.

For years, though, the industry has devised new and different programs to reverse the trends. Among them:

• Reach out to STEM high school students, exposing them to the industry.
• Increase recruitment efforts at universities.
• Strengthen partnerships and R&D efforts with universities.
• Establish internships and co-ops.
• Improve branding programs.

SEMI is also active here. In 2001, SEMI launched High Tech U, a program designed to interest high-school students in the semiconductor field.

Recently, SEMI launched two new programs. One is to form partnerships with universities to tap STEM talent. The other is to establish ties with community colleges. For this, the idea is to devise workforce development programs for technicians, such as machinists, operators and tool maintenance personnel. On top of that, SEMI recently announced SEMI Works, a comprehensive program to attract, develop and retain the talent critical to the worldwide electronics industry’s continued innovation and growth.

Most agree the STEM education process starts in the early stages. “We recognize that, from a larger community standpoint, it is important to help build the pipeline to STEM careers and cultivate interest in the technology industry at an earlier age at the K-12 levels,” said Audrey Charles, senior vice president of global human resources at Lam Research. “By supporting K-12 math and science education programs that better prepare students for high school and subsequent secondary education in math and science, there is an opportunity to foster more student interest in the challenging and rewarding careers that can be found in technology and engineering, both common and less common disciplines.”

It doesn’t stop there. “Opening our doors and exposing middle and high school students through onsite visits and encouraging employee mentoring opportunities also helps foster awareness and inspires today’s youth,” Charles said. “Additionally, within companies, it is important to implement programs to challenge engineers beyond the work in their discipline, and provide opportunities for continuous learning.”

Others agree. “Developing talent early is key to solving the talent shortage,” Veeco’s Wright said. “Internships, co-ops, and other early exposure opportunities provide potential talent with hands-on insight into just how impactful our industry is to the world of technology. Internally developing talent is always a good idea, and we should also do more of that. Branding and showcasing how our industry enables all this cool technology could (and should) attract new talent to our space and help keep those already here interested and engaged for the long term.”

From there, the challenge is to recruit and retain talent. But will any of these or other programs work?

It’s hard to quantify if any of the new or established programs have made any measurable gains. The industry will require new talent with fresh ideas, and attracting young people into a mature industry isn’t easy.

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