Samsung’s memory division recently reported record sales for Q1, sparking discontent within the company’s Device Solutions (DS) business, which encompasses the memory segment, System LSI (responsible for designing chipsets), and the foundry operations (fabricating chips for Samsung and external clients).
In light of these tensions, Samsung is confronting its largest strike in history. With 48,000 employees threatening to walk out beginning Thursday, the strike is set to last 18 days unless an agreement is reached or government intervention occurs.
SK Hynix, Korea’s other major semiconductor company and the world’s second-largest DRAM maker, has also benefited from the AI boom. However, unlike Samsung, it has opted to share these profits with its employees by removing the bonus pay cap.
Samsung is the leading DRAM maker, followed by SK Hynix and US’ Micron (source: TrendForce)As a result, last year, SK Hynix employees received bonuses that were three times higher than those awarded to their Samsung counterparts. This disparity is partially attributed to Samsung's existing cap on bonus payouts, limiting them to 50% of an employee’s annual salary.
The union representing Samsung employees is advocating for the elimination of this cap, as well as demanding that 15% of the company’s annual operating profit be allocated to bonuses.
While the memory sector is thriving, the other two divisions within Device Solutions are struggling. Samsung aims to focus bonuses primarily on its memory employees, whose 27,000-strong workforce stands to receive bonuses at least six times higher than those in the LSI and foundry sectors. The union deems this approach unfair and expresses concern that dissatisfied employees may seek opportunities elsewhere, especially as some are already transitioning to SK Hynix due to the earnings imbalance.
Samsung and SK Hynix share prices over the last three months (source: Reuters)For context, it’s important to recognize Samsung's immense stature; the company accounts for nearly a quarter of South Korea’s exports. While the South Korean economy was projected to grow by 2% this year, it is estimated that 0.5 percentage points of that growth could be lost due to the strike, according to an anonymous official from the central bank. However, the economic impacts may remain minimal unless the strike extends beyond the planned 18-day period.
In preparation for the potential strike, Samsung has requested that a portion of its workforce (7,087 employees) remain on duty to maintain essential operations and prevent disruptions to the production line. A court ruling granted Samsung a partial injunction on Monday to support this request.
The Korean government has the authority to mandate emergency arbitration, which would temporarily halt the strike for 30 days and facilitate negotiations between Samsung and its union.
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