US chip industry expected to be second only to retail in job declines
Only retail department stores will lose more jobs than the US chip industry over the next decade, according to government projections. And American executives might be joining the flight.
By Tam Harbert, Contributing Editor -- Electronic Business, 1/26/2010
Even for those who have watched semiconductor manufacturing move offshore over the last 25 years, the numbers are startling.
United States semiconductor and other electronic component makers will lose 146,000 jobs between 2008 and 2018, according to a report published by the US Bureau of Labor Statistics (BLS) in December. The report ranks the chip industry second highest in terms of projected job loss over the next decade, just below retail department stores. (See “Top losers” below.) And that’s on the heels of a loss of 217,000 semiconductor jobs from 1998 to 2008. All told, the BLS figures estimate US semiconductor manufacturing employment will have shrunk from an annual high of 676,000 in 2000 to 287,000 by 2018.
“My reaction when I saw those numbers was, ‘wow,’” said John Ciacchella, a principal and technology lead at Deloitte Consulting LLP who has been involved in the semiconductor industry for more than 20 years. “It’s a pretty big number when you put it in that context.”
While there are questions about how the BLS comes up with this data, most everyone agrees that the numbers overall demonstrate a broad, and worrisome, decline in semiconductor employment in the United States.
It’s no longer just manufacturing jobs. It’s also design and research jobs. And it is beginning to impact management jobs, even at the highest executive levels, according to some recruiters. The trend started a couple of years ago, said Al Delattre, global market managing director of technology at executive recruitment firm Korn/Ferry International. “Management is being displaced,” he said. “There are companies where you have the CEO on one continent and the CFO on another.”
According to the BLS report, the number of US management jobs in semiconductor and electronic component manufacturing will drop 35% in the next decade. Chief executive jobs, specifically, are projected to drop 41%.
Tim O’Shea, group leader for the semiconductor industry practice at Heidrick & Struggles, said he’s seen increasing movement of US managers to foreign shores. “Just in the last six months, I’ve seen a number of cases where [US] clients are looking to recruit senior executives who are willing to relocate either now or within a year or two to Asia. … They are talking about a permanent, or at least long term, relocation of the function to someplace in Asia.”
The trend alarms O’Shea. “In talking to my clients I continue to hear and see more and more thinking about and planning for either relocating business units or in some cases the entire company’s headquarters to some Asian location,” he said. “It’s a matter of great concern to anyone who cares about our industrial base in the semiconductor business.”
Foreign companies also are luring US management talent away, said Delattre. When he flew to the Consumer Electronics Show in January, Delattre found himself sitting next to a chief innovation officer of a Korean company and across the aisle from a vice president of R&D for a Japanese company. Both were Americans who had moved their families to Asian cities, he said.
The Semiconductor Industry Association, meanwhile, views the picture somewhat differently. While recognizing the decline in jobs over the last decade, the SIA maintains that further job loss is not inevitable, that it can be prevented by making changes in US government policy that will make it more attractive for semiconductor companies to build facilities in the United States. The SIA, as well as many semiconductor industry CEOs, have been calling on the US government for years to lower taxes rates, provide incentives and improve the US education system in order to keep the chip industry in the United States. “Assuming that we become competitive or closer to being competitive, with improvements in tax law and subsidies, for example, we will maintain our position,” said George Scalise, SIA president.
But the chances of that happening in the near future seem slim. There are no big changes being considered by Congress. And even if there were, government incentives aren’t the only reason for the flight. After all, some 75% of the US semiconductor industry’s sales are outside of the United States, according to the SIA’s own statistics.
In addition, the recent severe recession may have accelerated the trend. Said O’Shea: “I think this downturn has given many boards and CEOs reason to think at a profound level about the nature of their business and how they should be organized and deployed to best meet the needs of future markets.”
Counting jobs is tricky business
It’s hard to know how accurately the BLS numbers reflect reality. The SIA doesn’t think too much should be made of the BLS figures, said Daryl Hatano, vice president of public policy for the industry group. Both the categories the BLS uses and the way it counts jobs may not reflect the true number and type of jobs in the US semiconductor industry, he said.
The BLS probably wouldn’t disagree with that statement. The overall category of semiconductor manufacturing and other electronic components consists of four sub-categories: bare printed circuit boards, semiconductors and related devices, printed circuit assemblies, and electronic connectors and miscellaneous electronic components, said Michael Wolf, an economist at the BLS. The semiconductors subcategory represents about half of the larger category, but it did not see the largest percentage decline in jobs. That was in bare printed circuit boards, which dropped from 140,000 in 2000 to about 45,000 in 2009. Nevertheless, the semiconductor subcategory did drop substantially, from a peak of 292,000 jobs in 2001 to about 185,000 in 2009.
Further complicating the numbers is the fact that the BLS counts and classifies jobs by physical “establishments” of companies. For semiconductor manufacturing, these would be manufacturing facilities, so semiconductor designers or R&D staff would be counted only if a company has its chip design or R&D in the same physical space as its manufacturing, said Wolf.
Top losers
The Labor Department's Bureau of Labor Statistics predicts these 10 US industries will face the biggest job losses, in terms of number of jobs, from 2008 to 2018.
1. Department stores: 159,000 jobs, or 10.2% of its workforce.
2. Semiconductor and other electronic component makers: 146,000 jobs, or 33.7% of its workforce.
3. Auto parts manufacturers: 101,000 jobs, or 18.6% of its workforce.
4. US Postal Service: 98,000 jobs, or 13% of its workforce.
5. Printing businesses: 95,000 jobs, or 16% of its workforce.
6. Cut and sew apparel makers: 95,000 jobs, or 57% of its workforce.
7. Newspaper publishers: 81,000 jobs, or 24.8% of its workforce.
8. Support businesses for mining: 76,000 jobs, or 23.2% of its workforce.
9. Gas stations: 75,000 jobs, or 8.9% of its workforce.
10. Wired telecom businesses: 73,000 jobs, or 11% of its workforce.
Source: US Bureau of Labor Statistics, December 2009
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