Samsung’s memory division reported record sales for Q1, but this has caused discontent within the company, specifically the Device Solutions (DS) business. DS is home to the memory business, System LSI (which designs chipsets) and the foundry business (which fabs chips for Samsung and external clients).
Now Samsung is facing the biggest strike in its history – with 48,000 employees threatening to walk out – which is due to start on Thursday, unless an agreement is reached or the government intervenes. The strike is planned to last 18 days.
SK Hynix is also based in Korea and it is the world’s second largest DRAM chip maker after Samsung. SK is raking in the profits from the recent AI boom too, but it is sharing them with its employees – recently, the company removed its bonus pay cap.
Last year, this led to SK employees getting bonuses three times higher than their peers over at Samsung. This is partly because Samsung has a cap on bonus payouts that limits them to 50% of an employee’s annual salary.
This is one of the demands that Samsung’s union has made – it wants the company to abolish this cap. Also, Samsung should allocate 15% of its annual operating profit to bonuses.
There are additional considerations too – as detailed in the opening paragraph, Device Solutions is home to three different businesses. And while memory is hitting sales records, the other two aren’t doing so hot.
Samsung wants to focus bonuses on memory employees – the 27,000 strong workforce can receive bonuses that are at least six times higher than those that employees in the LSI and foundry business will receive. The union sees that as unfair and is worried that unsatisfied workers can quit and look for work elsewhere (Samsung is already losing some employees to SK over the disparity in earnings).
Let’s put things in perspective for those who don’t know how absolutely massive Samsung is – Samsung makes up almost a quarter of South Korea’s exports. The South Korean economy was predicted to grow by 2% this year, but 0.5 percentage points of that growth could be lost due to the strike, said an anonymous official from the central bank. Effects on the economy could be minimal, unless the strike extends past the 18-day window, however.
Samsung has requested that a number of employees remain at their posts (7,087) to preserve the essential functions at its facilities and prevent any damages to the production line. A court sided with Samsung on Monday and granted a partial injunction.
The Korean government can order an emergency arbitration, which will pause the strike for 30 days and allow the government time to mediate the negotiations between Samsung and its union.
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