Japan Inc Fears Outflow of Engineers to Korea, China

Japanese companies forced to lay off tens of thousands of highly trained engineers in the wake of the 2008 financial crisis are worried that their knowledge is building up the capabilities of rivals in Korea, Taiwan and China.

Japan wasn’t the only nation whose large firms were forced to lay off engineers due to the global crisis. But Japanese firms have been somewhat unique in that their efforts at cutting costs entailed laying off a disproportionately large numbers of world-class engineers, according to Mainichi Shimbun.

Panasonic and its group firms laid off about 36,000 workers during the year ending March 2012. Sony is expected to cut 10,000 more this fiscal year. Sharp plans to cut 10,000 by March 2014.

“Engineers are in excessive supply in Japan from the standpoint of China and South Korea,” Shuhei Hayakawa at the headhunter Search Firm Japan told Mainichi. “It is not difficult to get engineers in the fields of one’s choice.

“Japanese engineers used to be in great demand in the past, but Chinese and South Korean companies now tend to be fussy in selecting personnel resources,” Hayakawa said, attributing the attitude to rapid recent technological advances of firms in Korea, Taiwan and China.

Japanese firms aren’t the only ones worried about a brain drain. In S. Korea engineers who have worked at Samsung Electronics — now the global leader in many segments once dominated by Japanese firms — are eagerly sought out by Korean rivals or Chinese firms.

Many Japanese engineers leave voluntarily to rival foreign firms because domestic firms provide far less rewards for exceptional work in research and development than US firms, according to an official at the Ministry of Economy, Trade and Industry (METI).

Of Japanese firms who have production bases overseas, 58.6% said the reason for the loss of engineers to foreign rivals is “salaries and working conditions”, while the desire for a challenging career was cited by 42.4%, according to a METI survey conducted this year.

As Japanese firms lose the vitality they once enjoyed while growing into global leaders, their most capable engineers are increasingly drawn to the challenges offered by foreign firms in high growth mode, noted one Japanese executive at an appliance maker.