How many semiconductors do you think are in your car? Remember: Semiconductors are the tiny chips that control everything in your vehicle, from its engine to its airbags. The answer to the question is an astounding 1,400 semiconductors (on average).
The digital economy comprises more than 22% of the global GDP, and semiconductors have emerged as a cornerstone of this transformation. Positioned as the world’s fourth-most traded product, semiconductors, including their integrated circuits and related components, have become indispensable in driving computation and connectivity. Their importance in modern economies rivals that of staple commodities such as crude oil, vehicles and refined petroleum.
The global semiconductor market is expected to undergo a revival this year following a 9.4% decline in 2023. According to World Semiconductor Trade Statistics (WSTS), 2024 will see 13.1% growth, reaching a market valuation of $588 billion. In terms of actual performance, Europe is the only region that has shown constant growth since 2022 and is forecasting an estimated 4.3% growth for 2024.
Introduced in February 2022 and in effect since September 2023, the European Commission’s EU Chips Act includes up to $43 billion in targeted support for Europe’s semiconductor sector. These incentives aim to bolster the EU’s front-end manufacturing for first-of-a-kind technologies as well as research and development investments.
This expected growth across Europe will require industry organizations to ensure they have the best and brightest talent available to support business goals. WTW’s Tech, Media & Gaming (TMG) Compensation Report, which reflects responses from 154 unique semiconductor organizations globally including 16 European countries, shines a light on compensation strategies and pay trends across the industry.
Germany is delivering the highest level of pay in the sector followed by Netherlands, the UK and France. The difference in base pay is more pronounced as more senior professional levels, with semiconductor jobs commanding progressively elevated premiums above overall TMG organizations. In Germany, this base pay difference begins at survey grade 11, while in Netherlands the increase is noticeable from survey grade 14 and onward (see Figure 1).
Moreover, when considering total target annual compensation (TTAC) inclusive of variable pay components, the premium is evident in survey grade 12 and above in the German and Dutch semiconductor sectors versus TMG (see Figure 2). In the UK, this trend begins at survey grade 14.
Last year was slightly challenging for industry organizations as the North America and Asia-Pacific semiconductor markets experienced negative growth, according to WSTS. WTW’s Salary Budget Planning Report – EMEA (December edition) projected 2024 salary increases in Europe to be lower compared to 2023, hovering around 4%:
Looking at the TMG sector, Germany’s semiconductor industry is forecasted to grow at the same rate as overall TMG. However, France is forecasted to grow at a marginally higher rate than TMG, and the most significant difference is in the UK (see Figures 3a-3c).
Total annual compensation (TAC) in the German semiconductor industry surpassed the rest of TMG for key functional roles, including technology product development and engineering (see Figure 4).
This contrasts with Netherlands and the UK, where senior professionals and managerial roles are earning less than their non-semiconductor counterparts across TMG. Additionally, when comparing pay levels across the biggest European markets, both technology and engineering roles are most competitive in Germany, followed by Netherlands, the UK and France (see Figure 5).
In a tight and changing semiconductor landscape, a skills-based approach can help organizations attract and retain talent as well as prioritize their upskilling through training. The most in-demand skills in the industry are:
Increasing regulatory requirements was the most cited factor for increases in pay program communication in the technology and telecom industry, according to WTW’s 2023 Pay Transparency Survey. Member states have until June 2026 to transpose the EU Pay Transparency Directive into local law.
At that time, organizations will need to calculate and report their gender pay gap at an entity level and by employee category. Any differences exceeding 5% that can’t be explained by objective criteria will need to undergo a detailed pay assessment in collaboration with worker representatives.
Gender-related pay gaps to exist in Europe’s semiconductor industry, according to analysis (see Figure 6). This unadjusted gap between average male and female pay will need to be explained by objective factors under the Directive, thereby increasing the need for employers to be confident on pay equity and transparency and know that their decisions are defensible.
Supply chain disruptions, geopolitical tensions and an unprecedented surge in demand have created significant challenges for the semiconductor industry. And, of course, we cannot forget the pandemic and how it exposed vulnerabilities within global supply chains, effectively disrupting production and distribution networks worldwide.
Moreover, geopolitical tensions have added another layer of complexity to the semiconductor landscape. The escalating rivalry between major semiconductor-producing nations coupled with trade restrictions and sanctions has prompted companies to reassess their sourcing strategies for equipment and production materials and diversity their supply chains to mitigate geopolitical risks.
Despite these challenges, the industry continues to experience soaring demand driven by the proliferation of digital technologies across sectors. The rapid expansion of 5G networks, the Internet of Things (IoT), artificial intelligence and autonomous vehicles have fueled an insatiable appetite for semiconductor chips.
When considering approaches to finding and keeping the critical talent that industry organizations will need for future success, it is crucial to benchmark against relevant comparator organizations to understand your organization’s competitiveness in the talent market.
Additionally, a gender-neutral and objective job evaluation system and related pay structures will need to be in place to support the delivery of equal pay for work of equal value. Ultimately, these actions will rely on the timeliest, most reliable data that supports defensible and competitive pay-related decisions.
