Editorial: How China Can Overcome Its Talent Deficit and Become a Chipmaking Power

China is increasingly feeling the pain of American attempts to choke off its supply of microchips. The U.S. government has restricted semiconductor sales to telecoms behemoth Huawei Technologies Co. Ltd. and ramped up the pressure on many other Chinese technology firms.

There is overwhelming consensus in China that we urgently need breakthroughs in domestic chip design and manufacturing. Recently, the State Council, China’s cabinet, issued several policies to spur development of high-quality integrated circuits and software industries. The initiatives placed particular emphasis on worker training. Clearly, people are the original and most crucial productive force, especially in knowledge-intensive sectors like semiconductors.

Contrary to popular opinion, China was not a late arrival to the semiconductor industry. However, our progress so far has been less than ideal. A lack of talent, low levels of investment, and sclerotic state-owned enterprises (SOEs) have all been offered as explanations for why China’s chip industry lags behind other nations — especially the first issue.

As reform and opening-up has taken root and the Chinese economy has grown stronger, these limitations have eased somewhat. We established an investment fund for the domestic integrated circuit sector in 2014, and have since expanded it thanks to our growing financial clout. SOE reforms and a large influx of private firms have dramatically reduced, though not eradicated, the corporate and regulatory issues that long blighted the industry.

In practice, there is a cause-effect relationship between developing industry talent, effectively using investments and business regulation. Relatively speaking, though, the talent problem is currently our most serious.

Cultivating chip-industry talent has long been on the Chinese government’s agenda. In 2000 and 2011, the State Council published important documents encouraging the development of the software and integrated circuits industries. In both, the body proposed policies for growing the talent base.

However, according to estimates from the China Integrated Circuit Industry Talent White Paper, China’s skills gap remains considerable at around 200,000 to 300,000 people. The new policies propose further strengthening higher education courses devoted to integrated circuits and software, as well as redoubling efforts to attract top experts and workers into the sector. Undoubtedly, the overall thrust is correct.

The fact that we still haven’t resolved our talent bottlenecks shows we must learn from our past experiences. The chip industry has both general and industry-specific kinds of training. Relying on universities and business investments to cultivate and attract the right kind of talent abroad might help address the personnel shortfall. But the quality of workers and whether they have the ability to fully express their talents do not hinge on investments alone.

If we want to train first-rate workers and really bring their skills and intellect into our domestic chip sector, then we need to further break down systemic and regulatory barriers and create a free-thinking environment that boldly explores new innovations.

Education is the first step. The new policies demand that China accelerate the development of first-class courses in integrated circuits. According to reports, the Academic Degrees Committee of the State Council has already passed the proposals, which may see such courses become standalone college subjects in their own right instead of being incorporated into electronics and technology courses.

We can therefore expect that more higher education institutions will launch majors in integrated circuits. However, we still face severe tests regarding our ability to churn out high-quality industry talent. As a new first-tier course, we should get rid of outmoded conventions and bravely explore training models that are in line with semiconductor development and the needs of the market. The propulsion for this will come from tie-ups between educators and businesses.

Regardless of whether we’re talking about design, manufacturing or testing, the chip sector, both upstream and downstream, is minutely segmented. New equipment and materials emerge frequently, compounding the need for educators to adapt to technological advancements. This will directly determine the quality of our talent cultivation.

Additionally, semiconductors are not just electronic technology, but also tightly bound up with disciplines like math, physics and chemistry. It would be unhelpful to chase quick rewards. We need the government to consider overarching reforms for technology and education.

Skilled workers are not only trained by universities and research institutes, but also tempered by the market. With the development of China’s chip sector, demand for talent will grow. At the same time, the industry’s standing will rise, creating a virtuous circle of creating talent and deploying it where needed. The government needs to do the best possible job of serving skilled workers and providing them with a positive environment in which to compete.

When it comes to supporting skilled workers, we should treat all businesses equitably, no matter their ownership models. Semiconductors are a highly internationalized industry. Although China is coming to realize that we must keep a firm grip on core technologies, replacing things is not the same as shutting things down. China’s chip sector is still in its initial development stage and depends heavily on global talent and knowledge flows. At the same time as bringing in international talent, we must also overcome barriers and strive to create the conditions for global cooperation.

Only a free academic environment can give rise to unfettered innovation. The fact that our students lack creativity and imagination is the result of an education system that has been ridden with problems for many years now. Certain enterprises, where reform has not yet cut the mustard, remain incorrigibly bureaucratic. Surely it is foolhardy to try and force these kinds of entities to shoulder the burden of innovation.

The Taiwan engineer Burn-Jeng Lin famously used the well-known concept of refraction to propose photoetching in water, an important part of chip manufacturing that made chipmaker TSMC a world-leader. We must ask ourselves: Can similar examples of legendary innovation happen on the Chinese mainland?

The spark of creativity that residents in the minds of scientists must be nurtured into practical, industry-focused innovation. Realizing the dreams of scientists is extremely difficult whereas killing the shoots of creativity is all too easy. Respecting knowledge and talent should not just be a slogan: We need to bake it into our systems and regulations. If businesses and schools manage this, the whole country will follow.

The history of the global semiconductor industry shows that granting responsibilities to companies is not just desirable, but essential to national industrial policy. Chinese chipmakers, playing catchup with the rest of the world, need help from policymakers more than others.

However, in the end semiconductors are products, and we must let the market play the deciding role in allocating capital resources. To beef up the chip sector right now, we must guard against governments at all levels rushing to confront the problem or changing it into a money game. For one thing, it isn’t good for developing and using talent. China’s semiconductor industry is currently navigating a storm, and we hope the high winds and driving rain will see tens of thousands more talented designers and technicians rise to meet the challenge.

Contact translator Matthew Walsh (matthewwalsh@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

Support quality journalism in China. Subscribe to Caixin Global starting at $0.99.