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If Tsai Ing-wen’s plan works out, her country will start churning out up to 500 new electronics engineering experts annually from next year. On the orders of the Taiwanese president, five universities have set up “semiconductor academies”, each with a quota of producing 100 masters and PhDs a year.

For Taiwan’s economy, the prospective experts are a matter of survival.

Brisk demand for semiconductors, driven by working from home due to the pandemic as well as the proliferation of chips into everything from augmented reality headsets to electric cars, has powered an economic boom in Taiwan while most of the world sank into Covid-induced recession over the past two years. Taiwan Semiconductor Manufacturing Company, the world’s largest producer of made-to-order chips, is expected to produce another set of sparkling results on Thursday, reflecting that boom.

But as fewer and fewer young people in Taiwan’s shrinking population opt for electronics engineering degrees (and an even smaller number study in the US), the source that has fed the country’s transformation into the biggest global hub for chip manufacturing is rapidly drying up.

At the same time, governments from the US to Europe to Japan are trying to reshore semiconductor manufacturing to secure supply chains crucial to defence industries and reduce the risk of disruption, like the severe chip shortage that forced some car plants to stop production last year. The subsidies-fuelled push has already led TSMC to build a $12bn fabrication plant, or fab, in the US and commit to a joint venture in Japan.

Tsai’s “semiconductor academies” aim to address all that. “We will train people from the countries that don’t have a chip industry yet. They can start working here first as long as the chip industry in their own country isn’t ready yet,” says Kung Ming-hsin, Taiwan’s chief economic planner. “It will be like the Taiwanese who got their PhDs in the US and built our chip industry after they returned home. It will create a virtuous circle of semiconductor talent.”

That would follow the example of TSMC founder Morris Chang, an alumnus of MIT and Stanford who set up his own company in Taiwan after more than 25 years at Texas Instruments in the US.

Indeed, Taiwan urgently needs a replacement for the brains that have been driving its chip industry for decades. In the late 1980s, the number of Taiwanese pursuing engineering PhDs in the US grew from 745 in 1985 to a peak of 1,302 in 1994, according to the National Science Foundation of the US. But they have declined ever since, hitting a new low of just 417 in 2020, the most recent year for which data are available.

Moreover, 76.9 per cent of Taiwanese who received doctorate degrees in the US in 2020 were planning to stay, up from 60 per cent 20 years ago.

The Taiwanese government now hopes that budding engineers from other countries with the ambition to build a chip industry, such as India, can form the same kind of bond with Taiwan.

“You can see from our past that most of the people who studied and worked in the US and then came back have kept a very good relationship with the US. When they upgrade their technology, they still co-operate with the US. And it will be the same with the people who study here,” says Kung.

But the dearth of new tech talent has not just squeezed Taiwan’s semiconductor sector. It has also suffocated the country’s tech industry as a whole, leaving it stuck in manufacturing and failing to take the next step into higher-margin segments of the chip sector as well as new areas.

To reinvigorate its innovation advantage, Taiwan needs to focus more on markets than on technology, Evan Feigenbaum, vice-president for studies at the Carnegie Endowment in Washington, urged in a 2020 report based on a survey of tech industry experts in Taiwan and the US. 

“The Taiwan ecosystem has faced special pressures on its ability to reorient from semiconductor and chipset design and fabrication toward new, future-facing industries. Many of the new systems in these industries do require advanced hardware,” he wrote. “But they also require parallel adaptations in software, and the firms and national innovation systems that lead these industries tend to derive their competitive advantages from hardware-software integration.”

The shortage of engineering talent and western countries’ grab for chip fabs have finally created the impetus for Taipei to act on this advice. The new academies offer everything from integrated circuit design to nanoscience. Taiwan’s tech companies had better jump on that bandwagon before the chip boom created by the pandemic fizzles out.

kathrin.hille@ft.com

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