Samsung Elec set to face major strike on Thursday after talks with union collapse

Samsung Electronics’ union plans for 48,000 workers to walk off the job on Thursday after efforts to clinch a deal on bonus payments fell through, threatening the health of South Korea’s economy and denting the global supply of semiconductors.

Bowing and holding back tears, union leader Choi Seung-ho said the union had accepted a final proposal presented by a government mediator, but the 18-day strike would go ahead as management had not come round on one remaining sticking point.

“I would like to apologise to the public for not being able to produce a good result despite making as many concessions as possible,” he said.

“We will not cease our efforts to reach a deal even during the strike.”

Samsung Electronics said in a statement that the union had insisted on “unacceptable demands” that included the size of bonuses for loss-making units.

“The reason an agreement could not be reached .... is that accepting ⁠the labor union’s excessive demands would undermine the fundamental principles of company management,” it said.

Samsung shares were trading 1.6% lower on Wednesday afternoon and are down 4.5% for the past week. Some investors have said they are more concerned about the prospects of a permanent spike in labour costs than they are about the one-off costs of the strike.

EMERGENCY ARBITRATION OR NOT?

Much attention will now turn to whether the government will step in and order emergency arbitration as it warned it might do at the weekend, citing the potential damage the strike could inflict on the economy.

Samsung accounts for almost a quarter of South Korea’s exports and is also the world’s largest memory chip maker so production disruptions could further fuel price rises at a time when the AI boom has caused shortages.

An emergency arbitration order, which has been rarely employed, would prevent the strike from going ahead for 30 days while the government mediates talks.

But a South Korean government official said on Wednesday that talk of emergency arbitration is premature and that there was still time for dialogue.

South Korea’s labour commissioner Park Soo-keun, who mediated the talks, said that the government is open to restarting the mediation process “anytime” ⁠while the Presidential Blue House urged both sides to end the dispute.

The strike could in a worst-case scenario shave 0.5 percentage points off a forecast 2.0% expansion for the South Korean economy this year, according to an official from the country’s central bank, who declined to be named.

The 48,000 employees who plan to strike, the majority of them belonging to the conglomerate’s chip divisions, account for 38% of Samsung’s domestic workforce.

FRUSTRATED BY PAY GAP WITH SK HYNIX

The union had demanded that Samsung abolish a cap on bonuses that stands at 50% of annual salaries, allocate 15% of annual operating profit to bonuses and that these changes be formalised ⁠beyond one year.

Samsung remains one of the most sought-after workplaces in Korea, but employees are furious about the pay gap with smaller rival SK Hynix which took the lead in supplying high-bandwidth memory for AI chip units to Nvidia.

Samsung’s union says SK Hynix workers last year received bonuses more than three times higher than those of Samsung workers, resulting in an exodus of Samsung employees to SK Hynix and a surge in union ⁠membership.

Gary Tan, a portfolio manager at Allspring Global Investments, said the impact on supply chains should remain limited unless the strike is prolonged.

“The bigger effect is on market sentiment and longer-term memory industry pricing structure, reinforcing cost pressures,” said Tan, whose fund holds Samsung shares.

A court on Monday partially granted Samsung’s request for an injunction, ruling that essential staffing levels at some production facilities must ⁠be maintained to prevent production materials and facilities from being damaged during any industrial action. Samsung has notified the union that this will require 7,087 workers to report for work.

Source: Reuters

--Agencies