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Prof. Clair Brown
Prof Clair Brown, Director, CWTS

Chips and Change: How Crisis Reshapes the Semiconductor Industry

Chips and Change: How Crisis Reshapes the Semiconductor Industry

The Center for Work, Technology, and Society has two major projects underway.

One project is exploring how globalization has been affecting high-tech engineers and their work, especially in the semiconductor industry. Prof. Clair Brown and Dr. Greg Linden have been conducting fieldwork in the United States, Japan, Taiwan, India, and China to collect data on the skills of engineers and the types of job tasks being done, and on the communication and knowledge flows between a firm’s global activities. This work is funded by IIR (through their GSR program), the Sloan Foundation, and ITEC-COE at Doshisha University, Japan.

Prof. Clair Brown and Dr. Greg Linden presented some of their findings at the National Academy of Engineering’s Workshop on the Offshoring of Engineering: Facts, Myths, Unknowns, and Implications held October 24-25, 2006 in Washington, DC. Their research shows that, overall, the U.S. labor market for high-tech engineers is healthy. Semiconductor (“chip”) engineers are finding adequate employment opportunities, with wages above the average of engineers in other industries and with real earnings
growth. However they found some causes for concern. Older engineers (over 50) face a decline in job opportunities and a fall in earnings, especially for the bottom 10%. Also a declining premium for MS and PhD degrees indicates that graduate training may not be a good investment for domestic students. Another cloud on the horizon is that the heavy use of H-1B visas to hire engineers may be limiting U.S. engineers’ salary growth, and the large-scale involvement of foreign students in advanced engineering degree programs (>50% for PhDs granted since 2002; see graph) may make the U.S. supply of  engineers vulnerable to political and economic turbulence.

Their research also finds that offshoring of engineering work by U.S. semiconductor companies, especially to India, appears to be more of a complement than a substitute to U.S. activities. Their fieldwork indicates that, in most cases, offshore development work supports higher-level coordination and conceptual work in the U.S.

In their forthcoming book, Change is the Only Constant: How the Chip Industry Reinvents Itself, Brown and Linden analyze the last quarter century of the industry's history in a framework of crisis and response. As potential barriers to the industry's growth appeared, organizational and technological innovations emerged to allow the industry to overcome the perceived crisis and continue on its path of progress. The semiconductor industry continues to provide high-quality engineering jobs and products that define the technological frontier for the rest of the economy.

Another project looks at what types of job ladders are offered by firms, and how workers put jobs together to form career paths over time, using a large data set that links employee and employer data over time (called LEHD data set). Prof. Brown, with her co-authors Julia Lane and John Haltiwanger, published the results of their multiyear study that explores the impact of economic turbulence on firms and workers in their book Economic Turbulence: Is a Volatile Economy Good for America? (University of Chicago Press, 2006). They found that U.S. workers and firms have been very resilient and resourceful in dealing with economic turbulence. Overall workers and firms have learned how to turn the threat of volatility into an opportunity. However not all workers and firms have fared well, as some firms have shrunk or disappeared, and some workers have had the trauma of long periods of unemployment, or been stuck with inferior jobs.

Brown’s study (with
Andersson, Campbell, Chiang, and Park) of Job Ladders (described by initial earnings, earnings growth, and tenure) looked at the jobs offered by firms in five industries: financial services, retail food, semiconductors, software, and trucking. They found that industry characteristics matter, since the five industries display wide variations in worker mobility and job ladders. Even within an industry, firm characteristics (and firm HRM policies) matter in the job ladders offered to comparable workers (same education, age, experience and gender):  after ten years, earnings to a group of comparable may average 50% to 100% higher in one firm than another.

As expected, large, growing firms provide the most jobs to workers, and these firms tend to provide the best job ladders. However even companies with long job ladders that provide career development may allow only selected workers access to them (“up or out”). In shrinking firms, experienced workers are often replaced with cheaper new hires, although older workers, especially in unionized companies, may be able to stay on long job ladders that are not available to new hires.

Career Paths
(described by initial earnings, earnings growth, and earnings over the period 1992-2002) show how workers piece together jobs. Jobs landed by workers reflect their skills, talents, networks, and luck. Workers may learn new skills on jobs, which can be useful in their search for the next job. Since the supply of good jobs is constrained, workers may have to queue for good jobs.

Workers who land a good job will stick with it (if possible) and become “loyalists”. Workers who land inferior jobs will change jobs (quits and layoffs) and eventually most workers will land a better job. Job changing takes time, with long period of 1-1.5 years without work. As expected, the job ladders offered to women are worse than men’s, and so women’s career paths are worse than men’s.

This research does not mean that “volatility is good” for the economy, since a less volatile economy may lead to even better outcomes. However it does mean that “volatility is not bad”, in that workers have been able to use mobility to improve their jobs; without volatility, more workers may have been able to be “loyalists” with even better career paths. Since volatility appears to be a characteristic of the global economy, fortunately U.S. workers have been able to improve their jobs when they changed jobs, so career paths have improved for most workers over time.


Economic Turbulence: Is a Volatile Economy Good for America? (with John Haltiwanger and Julia Lane), Chicago: University of Chicago Press, 2006. (Background papers and technical materials available online www.economicturbulence.com.)

“Offshoring in the Semiconductor Industry: A Historical Perspective” (with Greg Linden), in Susan M. Collins and Lael Brainard, eds. Brookings Trade Forum 2005: Offshoring White Collar Work. Washington, DC: Brookings Institution Press (Ch. 8, pp. 279-333), 2006.

“Managing Creativity and Control of Knowledge Workers”, in D. Hugh Whittaker and Robert E. Cole, eds. Recovering from Success: Innovation and Technology Management in Japan. Oxford: Oxford University Press, 2006.

“An International Investigation of Problem-Solving Performance in the Semiconductor Industry” (with Melissa Appleyard and Linda Sattler) Journal of Product Innovation Management, 2006. 23: 147-167.

“Making vs. Buying Knowledge:  The Relationship between R&D Investment and Workforce Knowledge” (with Fredrik Andersson, Benjamin A. Campbell, Hyowook Chiang, and Yooki Park). Paper presented at NBER Summer Institute, June 2005, and at CAFÉ European Conference, October 2006.

“The Role of Japanese Start-ups in High-Tech Innovation” (with Greg Linden and Eiichi Yamaguchi). ITEC Policy Brief, ITEC-COE, Doshisha University, 2005.

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