Samsung Strike Crisis Reverses. Wins Court Support Samsung Shares Turn to Rise 3.88% But Deeper Risks Only Just Exposed

In its ruling, the court stipulated that during the strike, the union must not stop, abolish, or obstruct the operation of facilities and production activities maintained with "the same level of manpower, working hours, and duty of care as usual." This means that while the union may strike, production line operations must be sustained.

The rationale for this ruling stems from a provision in South Korean labor law: unions must not halt the operation of "safety protection facilities." Since Samsung includes its entire semiconductor wafer production process under the umbrella of safety protection facilities, the court has the authority to mandate that production lines remain operational. Of the approximately 77,000 total employees in Samsung's semiconductor division, the court required about 4,000 to 8,000 to maintain normal work duties, as these are essential positions for safety facilities.

South Korea's Financial News cited analysis stating that approximately 40,000 workers can still participate in the strike. However, such a strike appears to have lost its significance; analysts point out that the 4,000 to 8,000 employees mandated to remain are concentrated at key operational nodes, which is sufficient to ensure production line continuity. According to the union's previous estimates, its planned 18-day production halt was intended to cause approximately $20 billion in losses to pressure management into negotiations. Yet, given the court's ruling, the union's objective is no longer achievable.

The reason Samsung's stock price reversed its decline today is that the market's pessimistic expectations regarding production line disruptions were significantly overturned. Previously, the market feared that a Samsung strike would widen the global HBM supply gap, as SK Hynix and Micron (MU) similarly have no idle capacity. This coincides with a critical juncture for NVIDIA's (NVDA) Blackwell chip shipments, where an HBM supply gap would directly impact the delivery schedule of AI data centers. Furthermore, late May to early June is a critical window for stabilizing HBM4 yields and ramping up shipments; if production were interrupted now, the market share Samsung worked so hard to regain might again fall significantly behind SK Hynix or even be overtaken by Micron. With the court issuing a ruling today, these concerns have instantly dissipated; at the very least, Samsung can maintain its basic production capacity without significantly affecting its performance at this critical stage.

However, what requires continued attention is the extent to which the court's injunction against the union can be enforced, the costs the union will face for violating the injunction, and the extent to which production would drop if the union opts for a slowdown rather than a strike. No details have yet been disclosed on how the court would rule on injunction violations, so variables remain. Secondly, although the South Korean government can exercise its "emergency adjustment power" to forcibly suspend a strike for up to 30 days, it remains to be seen if the government would truly risk the political cost of ending the strike.

Furthermore, although the strike may be coming to an end, the deep-seated conflicts have merely been exposed, not resolved. The Samsung union's core demand in this strike is to revise the bonus distribution scheme, eliminating the 50% annual salary bonus cap and allocating 15% of the company's annual operating profit into a unified bonus pool for all employees. This stands in contrast to competitor SK Hynix, which pledged as early as last September to abolish bonus caps and allocate 10% of operating profit to employee bonuses for a ten-year period. Dissatisfaction among Samsung employees will not vanish simply because the strike was called off.

Analysts point out that if Samsung maintains its current compensation structure, it will struggle to match SK Hynix in attracting and retaining talent, potentially leading to a brain drain and a decline in its long-term competitiveness. According to South Korean media reports such as TheElec, Samsung's largest union, SELU, noted that over 200 Samsung employees have jumped ship to SK Hynix in the past four months alone, demonstrating that Samsung's talent attrition problem has already begun to surface.

Additionally, Samsung's compensation issues include the uneven distribution of internal bonuses. Reports reveal that Samsung's memory chip division takes the lion's share of bonuses, while the logic chip and foundry divisions receive very little. This could lead to Samsung not only falling behind SK Hynix in memory chip R&D but also seeing a significant decline in the competitiveness of its foundry business, making it even harder to compete with TSMC.

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