Wanted: High-Tech Labor, Will Train

Will a Tight Labor Market Short Circuit Austin's High-Tech Industry?

Suffice it to say that Motorola, Advanced Micro Devices, and other high-tech manufacturers in Austin are not cheering for Samsung to locate here. Why?

They're having enough trouble finding workers as it is. If Samsung decides to build a new chip factory here, an already tight labor market could get frantic.

The Korean company appears to be in no hurry to announce its decision on whether to build its new billion dollar chip plant here or in Portland, Oregon - both cities are vying for Samsung and other high-tech companies, using tax abatement incentives. But Samsung or no Samsung, Austin's computer and microchip industry is in the midst of a serious labor shortage. Advanced Micro Devices (AMD) alone has 500 job openings. Motorola has 400. Applied Materials has 150. All are expanding their Austin operations, and all need skilled workers.

But where will those workers come from? As of June this year, the Austin metropolitan area's unemployment rate sits at 3.6%, about half the state average of 6.8%. (The national rate is 5.7%.) "Four percent is considered full employment," says Jon Hockenyos, an economist and managing director of Texas Perspectives, an economic consulting and analysis firm. Hockenyos says that Austin's booming economy and escalating housing prices are squeezing the labor market, and there doesn't appear to be an end in sight.

A National Trend

The demand for workers in the semiconductor sector is driven by the economy's hunger for integrated circuits. According to figures released on July 31 by Dataquest, a San Jose research firm, North American consumers will purchase $48 billion worth of semiconductors this year, nearly twice the amount for 1990. By the year 2000, semiconductor sales in North America are expected to double again, to nearly $100 billion per year.

To meet demand, semiconductor manufacturers are spending big. This year, the industry will invest $10.3 billion in new plants and equipment in North America, more than double the amount spent just two years ago.

Much of that spending is happening in Austin. Motorola just completed work on a $1 billion semiconductor fabrication facility, or fab. AMD has invested $1.3 billion in a new fab which, later this year, will begin producing the K5 chip, AMD's answer to Intel's Pentium microprocessor. They've hired 800 workers this year and still have more than 500 job openings. "It's a real problem," says AMD's Jim Everett. "We are having trouble finding the number of qualified engineers we need." Like other manufacturers, AMD also needs equipment operators, technicians, semiconductor designers, and office staff.

The labor shortage is not unique to Austin. Industry recruiters note similar shortages in Portland, Phoenix, San Jose, and Albuquerque. "No one anticipated this industry would grow this fast, and regions haven't responded," says Lynne St. Jean of the Portland Development Commission. According to St. Jean, microchip makers in the Portland area will need to hire 7,000 new workers over the next five years. And that estimate may be low. Intel is building a $2.2 billion semiconductor plant in the area, and last week, LSI Logic announced a plan to spend $4 billion over the next 15 years to expand its Portland operations.

To address the worker shortage, technology companies are forming partnerships with local community colleges to develop training courses that will prepare workers for a career in the high-tech industry. Here in Austin, AMD launched a program last month which begins training workers in electronics at the high school level. The program, called Accelerate Career in Electronics, allows students from Johnston and Del Valle High Schools to take courses that will allow them to get credit at Austin Community College (ACC), and to get paid summer jobs at AMD. For its part, ACC has created a special degree program called Semiconductor Manufacturing Technology.

But the new educational programs won't do anything to address the current need for skilled workers. Nader Pakdaman, a senior analyst at Dataquest, believes that the shortage of workers in the semiconductor industry will continue for several years, since advances in technology require commensurate advances in workers' skill levels. "In the car industry, changes are evolutionary," he explains. "In the semiconductor industry, changes are revolutionary." A couple of years ago, says Pakdaman, semiconductor companies could properly train a worker in six months. Today, that same worker will be required to have a high school education and may need two years of training before he or she can be put to work.

For young, and relatively inexperienced electrical engineers like Tony Liu, the market couldn't be better. By the time Liu graduated from the University of Texas last Saturday, he had four job offers, and could have had many more. Texas Instruments, GTE, Sprint, and Proctor & Gamble each offered the fledgling engineer jobs paying about $40,000 per year. "The market seems really good these days," says Liu, 23, who decided to take a job with Texas Instruments in Houston.

Crystal Semiconductor, an Austin-based chip design firm with 650 employees, hopes to hire 350 more by next March. To help find potential workers, Douglas Holberg, Crystal's head chip designer, recently taught a chip design class to UT electrical engineering students. Holberg will teach the course again this spring - at no cost to the school - and says he does it so that students will be versed in the skills needed when they enter the semiconductor industry.

Holberg knows how competitive the market has become. He helps Crystal recruit potential employees. And he gets recruited too. "I get a call from a head hunter at least once a week," said Holberg, who adds that he has no intention of leaving Austin or his job at Crystal.

The shortage of workers has begun bidding up salaries throughout the Austin labor market. A Wendy's hamburger shop in West Austin recently advertised positions starting at $7 per hour. AMD says it must now pay entry-level production workers $7.50 to $12 per hour. Everett of AMD said that wages in the semiconductor industry are increasing by about 6% per year. And here in Austin, wages may continue to escalate as high-tech companies continue growing. Equipment maker Tokyo Electron just began a $20 million construction project. Applied Materials is building two more manufacturing facilities and wants to hire 500 to 750 workers before the end of the year. Motorola plans to hire 2,000 more workers over the next five years.

In the Silicon Valley, the labor shortage has forced companies to raid each others' talent pools. And talent raids force wages up - which is why companies like Motorola don't want Samsung to move to Austin. "We are less than enthusiastic about Samsung coming to Austin," says Motorola spokesman Dan Rogers. "It would not be to the advantage of all the high-tech companies in Austin to have another major employer trying to hire 1,500 or 1,600 employees of the quality that they need. There's only a few places they can get those other people, and that's from other companies."

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