A High-Tech Capital Runs Dry On Engineers

If any company in Taiwan should have an easy time hiring top people, it's Taiwan Semiconductor Manufacturing Co. The world's biggest foundry, or made-to-order chipmaker, it is on the cutting edge of semiconductor technology. And while rivals are struggling, TSMC, which counts many of the top U.S. tech companies as clients, is highly profitable. It pays well, too: A senior engineer can make $150,000.

Yet mighty TSMC is in the market for hundreds of engineers and technicians, and it's having trouble finding them. It has even taken to advertising for help in local 7-Elevens. And it has beefed up recruiting in the U.S. and started hiring in China. "We cannot limit ourselves geographically," says TSMC President and CEO Rick Tsai. "We need to be more global-minded."

Taiwan is a victim of its own success. Having made itself a hub for multinationals looking to outsource design and manufacturing of chips, computers, cell phones, and consumer electronics, the island finds itself without enough engineers and designers to fill the available jobs. About 40,000 engineers enter the workforce each year, but they account for just 80% of the demand. The talent shortage threatens to delay Taiwan's transition to the next phase of tech development, which is crucial to maintaining the ability to serve big multinational customers such as IBM (IBM ), Hewlett-Packard (HPQ ), and Apple Computer (AAPL ). Personal and notebook computers, the bedrock of Taiwan's tech economy, are becoming increasingly commoditized. So companies such as Quanta Computer Inc. and Compal Electronics Inc. are trying to diversify into new products such as cell phones, televisions, and handheld digital devices. But more ambitious diversification is difficult because Taiwanese companies "don't have a broad enough skill base in their management teams," says Martin Hirt, a partner in the Taipei office of McKinsey & Co.

Ironically, one reason for the current skills shortage is the success the government has had in building up Taiwan's higher education system. These days fewer Taiwanese are going to school in the U.S. and taking jobs at big American tech companies. That means there are fewer experienced people for Taiwan companies to lure back home. "Because Taiwan's electronics industry has progressed so fast, most of my friends are more willing to stay in Taiwan and get into the industry as early as possible," says Lee Hsinte, a 32-year-old engineer for chip designer Mobilic Technology. He has a master's degree from National Chiaotung University, which has a prestigious engineering program.

The shrinking pool of foreign-trained workers means that Taiwan tech companies have to recruit staff right out of school. Quanta, the world's biggest producer of notebook PCs, last year hired 14% of its new employees directly from universities. This year that number will rise to 37%, the company says. Quanta has launched a program with National Taiwan University in Taipei and National Cheng Kung University in Tainan, in which the company agrees to pay $3,000 a semester in tuition fees for engineering students who commit to joining the company after graduation.

Another option for companies on the prowl for brainpower is China. Mobilic's CEO, Joseph Jiang, will open an R&D center near Shanghai soon. "The resource pool is not enough here in Taiwan," he says. But there's a shortage of talent in China as well. Turnover among engineers in Shanghai is double the 10%-15% rate in Taiwan, says David Wang, assistant vice-president for human resources at Quanta. "All those guys just move around from Company A to Company B." Clearly, for Taiwanese companies looking for people to power the next stage of growth, the corner convenience store won't be good enough.

By Bruce Einhorn, with Matt Kovac, in Hsinchu

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