Samsung Strike Looms After All-Night Talks Fail, Threatening Chip Supply Chain

The core of this dispute is employee dissatisfaction over the uneven distribution of gains in the AI era. Samsung's current bonus system has a clear cap, where annual bonuses cannot exceed 50% of the base salary; the union is demanding the complete abolition of this limit, the direct allocation of 15% of the company's annual operating profit into the employee bonus pool, and for the relevant terms to be formally written into labor contracts to protect long-term interests.

In response to the union's demands, Samsung management offered to allocate 10% of operating profit as bonuses and provide an additional one-time special compensation, claiming the proposal already "exceeds industry standards." Executives emphasized that the union's demand for 15% profit sharing is "unsustainable in the long term" and would affect the company's continued investment and competitiveness.

The divide between the two parties is so wide that even third-party mediators have found it difficult to intervene. The National Labor Relations Commission (NLRC) of South Korea stated in a release that due to the massive gap in demands, it has suspended mediation at the union's request but remains ready to provide support whenever both parties are willing.

The dissatisfaction of Samsung employees is not without cause, as the compensation at competitor SK Hynix has become their most direct benchmark. Following the debut of ChatGPT in late 2022, demand for AI chips exploded, and SK Hynix took the lead in the AI era by successfully entering Nvidia’s supply chain with its High Bandwidth Memory (HBM) products.

Last year, SK Hynix completely abolished its bonus cap system, resulting in employees receiving bonuses more than three times those of Samsung workers. This news triggered a surge in Samsung union membership, as employees argue that Samsung, which also benefits from the dividends of AI chip demand, has no reason to lag behind its competitors in profit distribution.

Samsung has also reaped significant rewards from the AI wave. As a leader in the global memory chip market, Samsung Electronics saw its net profit jump 755% year-over-year in the most recent fiscal quarter (ending in March), while its stock price has surged more than 400% over the past year, recently pushing its market capitalization past the $1 trillion milestone.

Market analysis indicates that if Samsung's operating profit for this fiscal year reaches 330 trillion won (approximately $220 billion) as expected, its profitability will surpass that of Apple ( AAPL) and Alphabet ( GOOGL ), ranking second globally, trailing only Nvidia ( NVDA ).

Such record-breaking performance stands in stark contrast to the rigid employee bonus caps, further exacerbating the conflict between labor and management.

The American Chamber of Commerce in Korea issued a statement this week noting that any significant production disruptions or operational uncertainties at Samsung could put additional pressure on the global memory semiconductor market, thereby exacerbating supply bottlenecks, price volatility, procurement risks, and broader supply chain instability.

As the world's largest supplier of DRAM and NAND flash memory, Samsung consistently maintains a market share of over 40% in the memory chip sector, with products widely used in critical applications such as data center servers, smartphones, and intelligent cockpits for new energy vehicles.

The union estimates that if an 18-day general strike occurs, Samsung's potential economic losses could reach as high as 30 trillion won (approximately $20 billion). Although this estimate stems from the union's perspective and its neutrality is debatable, the magnitude is sufficient to cause significant disruption to the industry landscape.

At a time when large AI models are iterating rapidly and demand for high-performance memory chips is at historical highs, any fluctuations in production capacity could drive up chip prices and trigger a ripple effect on the cost structure of the global technology industry.

Samsung Board Chairman Shin Je-yoon issued a warning, emphasizing that a strike would not only harm the shared interests of investors and employees but could also deal a substantial blow to the South Korean economy.

He specifically pointed out that if production disruptions lead to customer attrition and a decline in competitiveness, Samsung could risk losing its global market leadership. This concern is not unfounded; in April this year, the union organized a one-day strike, during which data showed Samsung's foundry capacity plummeted by 58.1% that day, and memory production line capacity fell by 18%, demonstrating the immediate disruption labor actions have on production rhythms.

Meanwhile, a strike could lead to delivery delays for customers and further upward pressure on chip prices, while providing competitors such as Micron ( MU) and SK Hynix with a window for market substitution.

Whether the strike can proceed as scheduled and what its actual scale will be still faces a key uncertainty—a judicial ruling.

Reportedly, the Suwon District Court has scheduled a second hearing on May 14 regarding an injunction application filed by Samsung Electronics. The core demand of the injunction is to prohibit employees from occupying key production areas and to mandate that personnel in safety and maintenance roles remain at their posts to avoid equipment damage or technical risks.

The court is expected to announce its decision by May 20, a date that falls exactly one day before the union's planned strike. In other words, even if the strike commences as planned, its actual scope and impact on the industry may still see significant adjustments depending on the judicial ruling.

Tracing the history of the confrontation between Samsung and the union, Samsung Group has long maintained an anti-union tradition. Founder Lee Byung-chul once publicly declared that he would "never allow unions to exist," a stance that persisted for decades until Samsung Electronics formally recognized the union's legal status for the first time in 2020.

In June 2024, the National Samsung Electronics Union (NSEU) launched the first large-scale strike in the company's history, involving approximately 28,000 employees. The core demand was a 6.5% wage increase, while management was only willing to accept a 5.1% proposal. Following the breakdown of negotiations, the union announced an indefinite strike on July 10, which lasted 25 days and primarily affected manufacturing and R&D departments, creating intermittent pressure on chip production capacity.

Ultimately, due to the dual impact of institutional constraints and cooling participation, the union announced a suspension of the action on August 1. However, the conflict was not fundamentally resolved; instead, the union shifted to a flexible and decentralized "guerrilla-style" strike strategy and merged into the larger Office Workers' Union in October of the same year to consolidate resources and enhance bargaining power.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.