China’s cooling economy hits hot chip sector start-ups and workers

Frank Jiang, a civil engineering graduate, has sent his resume to more than 20 chip companies since July after six months of training to build his skills for a job in China’s talent-poor semiconductor industry.

No one responded with an offer.

In China’s Covid-ravaged economic climate, workers have attempted to switch careers to an industry prioritized by Beijing, only to find it too is suffering from the downturn and job prospects are deteriorating.

“With layoffs almost everywhere, jobs at chip companies are at least stable with decent pay,” said Jiang, who is struggling to replicate the earlier success of a friend who switched from online math class to chip verification engineer.

The inability to boost hiring should alarm China’s leaders — it appears to be further pushing its goal of semiconductor self-sufficiency. It’s also a major concern for young job seekers like Jiang, who are finding the once hot chip job market cooling. The topic “The pessimistic recruitment situation in the IZ [integrated circuit] Industry” has received more than 1 million views on Zhihu, a question-and-answer website in China.

“We plan to hire only half the number we hired last year, but this time we received more resumes,” said an HR director at a well-known Shanghai-based chip company, who asked not to be identified.

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China’s semiconductor sector has suffered from both the deteriorating macroeconomic environment and a rebalancing of industrial financing. “Investment strategy has changed as market demand weakened, particularly for those focused on consumer markets,” said Ethan Qi, senior analyst at research firm Counterpoint.

Start-ups are particularly hard hit and are trying to cut their costs to ensure their survival. According to business data provider Qichacha, more than 3,400 Chinese chip companies have collapsed so far this year, already surpassing the total in 2021.

“That makes it harder for them to hire additional staff when they need to streamline,” said Szeho Ng, chief executive of financial firm China Renaissance. He added that many of the companies funded in 2020 would need to produce working products this year, otherwise they would struggle to attract more investment from private equity funds.

China has sought to accelerate the growth of its domestic semiconductor sector to reduce its reliance on imported chips. Investment and financing for chip companies in China exceeded RMB200 billion (US$29 billion) in both 2020 and 2021, and nearly RMB80 billion was raised in the first half of 2022, according to data released by ITjuzi, a research firm .

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“The country will continue to invest in the chip ecosystem, but it’s difficult for startups or those without a proven track record,” Ng said, adding that the government and private equity would continue to support companies showing promise in new areas .

Surveys show semiconductor talent is in short supply as domestic industry expands rapidly. According to the China Semiconductor Association, the shortage of required chip workers will exceed 250,000 this year and reach 300,000 by 2025.

Attempts to close the gap by lowering entry barriers seem to have created more problems than solved. In the recent past, chip companies have hired job seekers from unrelated backgrounds. “The industry has hired a lot of underskilled R&D in recent years, with laypersons making the switch through crash courses,” said the HR director.

“They could only do a bare minimum of work,” said Jerry Wu, a veteran chip design engineer who has received hundreds of inquiries about chip careers from his active WeChat blog. “Changing careers through months of crash courses is now becoming increasingly difficult.”

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At the other end of the scale, industry veterans are still highly valued but difficult to attract. A headhunter specializing in semiconductors in Shanghai said companies are still interested in experienced chip experts with overseas backgrounds, but few suitable candidates are willing to relocate to China because of rising geopolitical tensions and the restrictions of the zero-Covid policy.

Large, well-funded state-owned enterprises (SOEs) remain in the best position to expand, even increasing college hiring this year. Such moves are in line with President Xi Jinping’s recent call to focus on cutting-edge technologies.

SOEs also benefit from improved training courses and more suitable applicants after the development of semiconductor-oriented schools and departments in China’s universities. A talent acquisition manager at a leading state chipmaker said it was busy hiring more engineers for new assembly lines and factories. “I’m glad the overall quality of the candidates has improved a lot this year,” they said.

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