The labor union of South Korea's Samsung Electronics has announced plans to proceed with a strike on 21 May after negotiations with management over performance bonuses broke down. Nearly 48,000 employees are expected to participate in the strike lasting 18 days. This comes amid concerns that the strike could impact South Korea's economy and the global semiconductor supply chain.
Choi Seung-ho, the union leader, told the media that while the union accepted the government's final mediation proposal, management rejected it. "We deeply regret and are very disappointed, but the union insists on proceeding with the legally sanctioned strike," he said.
The dispute between labor and management has dragged on since late last year, triggered mainly by disagreements over "performance bonuses" tied to revenue from AI processor chip businesses amid a rising global memory market.
Reports indicate both sides agreed to remove the previous bonus cap, which was limited to no more than 50% of the annual salary, but the key sticking point remains the structure and distribution ratios of the bonuses.
The union demands a fixed bonus allocation of 15% of the operating profits from the semiconductor division, the removal of payment caps, and that this agreement be formalized as a long-term company policy rather than a one-year arrangement. They also call for bonuses for business units currently operating at a loss.
Management's proposal is to maintain the existing profit incentive system but calculate bonuses based on 10% of operating profits and introduce additional flexible compensation schemes.
Samsung Electronics expressed "deep regret" in a statement, noting the company had already made significant concessions to the union's demands. However, the union's insistence on excessive compensation, particularly for loss-making divisions, was unacceptable as it conflicts with fundamental corporate management principles.
Following the announcement of the negotiation breakdown, Samsung Electronics' stock price immediately dropped by about 3%.
The impending large-scale strike has raised serious concerns for the South Korean government, as Samsung accounts for nearly a quarter (25%) of the country's exports, particularly semiconductor exports which make up 35% of total exports. A prolonged strike could severely impact South Korea's export-driven economy.
Additionally, global corporations relying on South Korea's chip supply chain have also expressed concern, since Samsung is the world's largest memory chip manufacturer. Production disruptions could worsen the current chip shortage amid the AI boom.
Previously, the South Korean government threatened to invoke "emergency arbitration," a rarely used law to temporarily halt strikes for 30 days and force a return to negotiations. However, government officials stated on Wednesday that it is too early to apply this measure and believe there is still time for dialogue. Park Soo-keun, chair of the government labor committee mediator, said the government is ready to reopen mediation "at any time" if both sides are willing to meet again.