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Semiconductors

Taiwan to invest $300m in grad schools to stem chip brain drain

TSMC and peers act as US and China ramp up investment in semiconductor talent

The administration of President Tsai Ing-wen and major chipmakers are investing at least $300 million to create graduate programs for the semiconductor industry over the next decade. (Source photos by Taiwan's Office of the President and TSMC)

TAIPEI -- Taiwanese authorities and major chipmakers are investing at least $300 million to create graduate programs for the semiconductor industry over the next decade, in a move aimed at protecting the island's chip economy as the U.S. and China seek to cultivate their own talent and bring production onshore.

Taiwan Semiconductor Manufacturing Co., the world's biggest chipmaker, and local peers such as MediaTek and Powerchip Semiconductor Manufacturing Co. told Nikkei Asia they would endorse the campaign to build additional high-end chip schools. The companies said that talented employees are key to keeping the chip industry competitive -- a sector directly linked to national security.

President Tsai Ing-wen and Vice Premier Shen Jong-chin pushed the talent cultivation plan when major companies requested state assistance to solve the talent shortage around May last year, a person with direct knowledge told Nikkei Asia.

"More than a dozen chip companies -- from design, manufacturing to packaging and testing -- actively participated in the discussions for chip schools, as they foresee that demand for high-skilled chip talent will be even higher in the coming years, and that this is an imminent problem that needs to be solved soon," the person told Nikkei Asia.

Taiwan's move comes as the U.S. and China -- the world's two largest economies, slugging it out to gain control of the global tech industry -- are also accelerating their own semiconductor talent cultivation plans.

A supply chain review report by the White House last month said the country "has an immediate need for highly skilled workers in the semiconductor industry," as 77% of surveyed chip executives said the industry is facing a critical talent shortage. "As China increasingly seeks out foreign talent, retaining these students in the United States serves to both bolster the domestic semiconductor industry and prevents competitors from acquiring the talent necessary to surpass the United States," the report said.

China, on the other hand, has said that a lack of chip talent is one of the country's biggest hurdles to building a competitive local chip industry. The world's second-biggest economy has been increasing the number of microelectronics schools over the past few years, and says an additional 230,000 engineers will be required by 2022 to keep up with demand.

Peking University -- a leading university located in the Chinese capital -- on Thursday just inaugurated its first integrated circuits school. Ministry of Science and Technology officials and academics from the Chinese Academy of Sciences participated in the ceremony.

Taiwan's semiconductor industry -- second globally to the U.S. -- has been suffering from insufficient talent for years as the sector continues to pursue cutting-edge technologies. The number of Ph.D. students majoring in tech-related fields dropped from 23,261 in 2010 to 16,950 in 2020, Ministry of Education data shows.

China also aggressively lures highly skilled, experienced chip engineers. Two Chinese government-backed chip projects in 2019 and 2020 have together hired more than 100 veteran engineers and managers from TSMC. As of 2019, more than 3,000 people had left the island for China over the years. The Tsai administration in April asked local and foreign recruitment platform operators and headhunters to remove all listings for jobs in China, in an aggressive move to prevent the outflow of talent to the other side of the Taiwan Strait.

Chip companies in Taiwan have been calling on the administration of President Tsai Ing-wen to address the talent shortage.   © Reuters

Chip companies in Taiwan have been calling on the Tsai administration to address the talent shortage. Legislators this year passed a bipartisan law relaxing rigid education-related laws and allowing universities to set up graduate schools that can be run independently and bring in financing from leading tech groups and the National Development Fund -- Taiwan's top industry funding vehicle -- specifically for vital areas such as semiconductors and artificial intelligence.

But the law specifies that the new schools "cannot work with Chinese companies or take funding from China-based entities." The new schools also need to monitor students' employment paths upon graduation and "should guide them to pursue a career in Taiwan as their priority," the law says. Beijing views democratic Taiwan as a part of its territory, to be retaken by force if necessary.

Chu Chun-chang, director-general of Department of Higher Education with Taiwan's Ministry of Education, told Nikkei Asia in an interview that the ministry has received applications from four top Taiwanese universities to establish new schools that are set to nurture future high-end talent on semiconductors and artificial intelligence and receive ongoing support from industry players

Based on the current planning, each new chip college requires at least 200 million New Taiwan dollars ($7 million) in annual funding, while the outside commitment needs to last for at least eight to 12 years, Chu said.

That will total at least $300 million for the first four chip schools over the next 12 years, and the investment will increase once more schools and programs are on board.

TSMC, for one, will commit at least NT$100 million a year to the four schools for at least the next 10 years, sources told Nikkei Asia. Powerchip Chairman Frank Huang told Nikkei Asia that his company will invest NT$100 million annually.

TSMC spokeswoman Nina Kao told Nikkei Asia that the company has not yet finalized its budget but confirmed that the chipmaker will invest no less than what the state has committed and will work with the four new schools over the long term.

"In some of our future recruitment and planning, we do see a shortage for high-end chip talent for the whole supply chain in years to come," Kao said. "We have initiated a program since last year to provide scholarships for Ph.D. students, as we think it's vital to expand the high-end R&D workforce, not just for TSMC, but for the whole chip ecosystem."

"In order to have a competitive chip industry, it's essential that we have to continuously enlarge the talent base, because talent could come and go," Powerchip's Huang said. "All the major economies are working on this, and we see imminent need for Taiwan's crown-jewel semiconductor industry to speed up chip education for its longtime competitiveness."

All these chip schools will need to look for financing on their own from private companies, while Taiwan's National Development Fund will match the funds that each college secures, the Education Ministry's Chu said. Besides semiconductors, Taiwan is looking to increase talent in artificial intelligence, cybersecurity, and future fintech, the official said.

National Yangming Chiaotung University, the alma mater of many tech executives such as TSMC CEO C.C. Wei and Foxconn Chairman Young Liu, is the first of the four leading Taiwanese universities to receive permission to set up a new innovation school.

Preparations will start next month -- including setting up research centers, selection of the dean and supervision committee -- and it plans to take in more than 120 master's and Ph.D. students a year from the spring semester in 2022, Vice President Chen Yung-fu told Nikkei Asia.

The university has secured commitments totaling NT$165 million annually for up to 12 years from seven top Taiwanese tech companies, including TSMC, Foxconn, Powerchip, MediaTek, Novatek, Wistron and Advantech. Taiwan's National Development Fund is expected to invest at a similar level.

"The new school, with its own budget, board and management team, is independent from the university system. That is set to attract more top international professors as well as industry executives" to be faculty members, Chen said. He added that the school will better combine industry practices and scientific research and will be run like a "successful medical school" integrating research and clinical experience.

Chen Pei-li, deputy director of the Industrial Development Bureau, told Nikkei Asia that semiconductors are one of the most crucial national strategic industries to Taiwan.

"As the progress of chip technologies is marching toward its physical limits, the current education system could not really catch up with cultivating the right talents that the chip companies want, " Chen said. "So the companies want to get more involved in education," . "It is not just about donating money. The companies also help to tailor programs and find the right teachers -- those are the challenging parts."

Semiconductor chips are closely connected to national security, the heart and soul of devices and technologies from smartphones, data center servers and supercomputers to space and military tech.

The U.S., China, Europe and Japan all are rushing to build up their own advanced chip production capacity. TSMC, whose 5-nm chip production technology is currently the world's most advanced, is building its first cutting-edge chip facility in Arizona while also considering plans to build a factory in Japan's Kumamoto, Nikkei Asia has reported.

The strategic importance of Taiwan's semiconductor industry has been highlighted amid the Washington-Beijing tech war and elevated even more as the world suffers unprecedented chip shortages affecting industries from smartphones and PCs to automobiles. Major car making economies like the U.S., Germany and Japan have all reached out to Taiwan for help with easing the global crunch.

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