Layoffs Persist Despite Labor Crunch

"Winner-loser" mentality a factor

By Richard Bruner

The Semiconductor Industry Association (SIA) says "hiring is up" since billings have increased this year. The hiring surge parallels worldwide sales of semiconductors, which in September were "the largest we have seen all year," according to an SIA statement. The year-to-year growth in September was 24 percent.

At the same time, the American Electronic Association reports a 1.6 percent unemployment rate for engineers, 1.4 percent for computer programmers and 1.2 percent for computer scientists. In Silicon Valley, general unemployment is at 2.9 percent; in Austin, 2.1 percent; and in Fairfax County, Va., 1.5 percent.

Meanwhile, the number of high-tech graduating students is dropping -- electrical engineer graduates were down 33 percent between 1990 and 1996; computer science graduates declined 27 percent.

The Department of Labor has predicted a need for 461,000 high-tech scientists, engineers and technicians by 2006, with similar demands for computer engineers and systems analysts.

Unquestionably there is a shortage of skilled labor.

By contrast, though, the international outplacement firm Challenger, Gray & Christmas announced the computer industry had the second largest number of layoffs year-to-date (January through October), totaling 55,608 job cuts. Only the retail industry was higher. So, what's wrong with this picture?

Paradoxically, John Challenger, chief executive officer, said, "Human resource executives in high- and low-tech industries are at their wits' end trying to find skilled personnel." He explained the contradictions were the result of "tremendous competition in the semiconductor industry", which leads to "winners and losers."

For example, "When a company is not performing well vis a vis its competition, it often faces no other choice but to lay people off. Most companies don't ride with excess labor when the orders aren't coming in. Last year there was a shakeout, especially in 1998 and into 1999; there was a glut of product on the market. Prices were falling. Semiconductor companies were closing facilities. They were shuttering them. We saw a lot of layoffs. That has slowed down now. Now they've come out of the slump.

"Now you've got the big companies trying to buy up all the (labor) supply."

Not surprisingly, the data storage and disk drive industry has been extremely hard hit by price slumps.

One of the biggest layoffs happened at Seagate Technology -- 8,000. According to a spokesperson, the job cuts, mostly in its Asian factories, were because of "the dramatically increasing amount of automation we have in our factories." He added, "We need a more highly skilled work force. We're moving away from a hand assembly of components and disk drives." Seagate makes disk drives and tape drives and has factories in Singapore, Thailand, Malaysia, China and Northern Ireland. At the same time, it has started retraining many of its workers in those locations "to supplement its technical capabilities."

Read-Rite, another data storage company, has laid off 2,500. A spokesperson told Electronic News with heavy sarcasm, "Things in the data storage industry have been less than exciting for a while." On the other hand, Read-Rite feels a "very high demand for technical people. We're not doing any laying off now. Now, we're doing selective hiring in key spots." Read-Rite has sites in Milpitas and Fremont, Calif., plus operations in the Philippines, Thailand and Japan. The layoffs have been in all locations.

Electronic Data Systems (EDS) also laid off a substantial number of workers -- 5,200. According to a spokesperson, EDS is "right in the midst of a reorganization. We are restructuring and that does involve some job reduction. We're still looking at fine-tuning that reorganizational structure and I cannot say if we are concluded with reductions." EDS, an "informational technology services company," has operations in Plano, Texas; Washington D.C.; Detroit; the United Kingdom; Germany; and France. Most of the reorganization is happening in the United States.

Silicon Graphics has laid off 3,000 workers. A spokesperson told EN most of them occurred near the end of August. "We're trying to turn the company around and laying off in areas we're no longer going to put emphasis on. We are actually hiring in areas we are emphasizing, with a limited effort to recruit and hire people in specific areas." The company has begun partnering with other manufacturers in the creation of NT workstations, which accounts for much of the job cutting. "We have a huge emphasis in our company on our servers," said the spokesperson. "There's some hiring happening there. Also, a push in the development of Linux, an operating system."

If, despite these employment reductions, there is still a shortage of skilled workers, what is the solution? According to the AEA, "The only short-term action available for reducing these shortages is to increase the H-1B visa program cap on the number of foreign professionals high-tech companies can hire to fill critical vacant jobs. That is an absolute imperative."

Source: Challenger, Gray & Christmas, 1999