Samsung’s memory division has reported record sales for the first quarter of the year, but this success has not been without its challenges, particularly within the Device Solutions (DS) business. This division encompasses the memory business, System LSI, which designs chipsets, and the foundry business, which manufactures chips for both Samsung and external clients.
Now, Samsung is on the brink of its largest strike in history, with 48,000 employees threatening to walk out starting Thursday, unless an agreement is reached or the government intervenes. The planned strike is set to last 18 days.
SK Hynix, another major player in the industry, is also based in Korea and is the world’s second largest DRAM chip maker after Samsung. The company is also reaping profits from the recent AI boom, and it is sharing these profits with its employees. Recently, SK Hynix removed its bonus pay cap.
Samsung is the leading DRAM maker, followed by SK Hynix and US’ Micron (source: TrendForce)
Last year, this resulted in SK Hynix employees receiving bonuses that were three times higher than those at Samsung. This discrepancy is partly due to Samsung’s cap on bonus payouts, which limits them to 50% of an employee’s annual salary.
One of the key demands from Samsung’s union is the abolition of this cap. Additionally, the union wants Samsung to allocate 15% of its annual operating profit to bonuses. Device Solutions, as mentioned, houses three distinct businesses. While the memory sector is thriving, the other two are not performing as well.
Samsung has proposed focusing bonuses on memory employees, with the 27,000-strong workforce potentially receiving bonuses that are at least six times higher than those in the LSI and foundry businesses. The union views this as unfair and worries that dissatisfied workers may quit and seek employment elsewhere. Samsung is already losing some employees to SK Hynix due to the disparity in earnings.
Samsung and SK Hynix share prices over the last three months (source: Reuters)
To put things into perspective, Samsung’s operations are vast. The company makes up almost a quarter of South Korea’s exports. The South Korean economy was predicted to grow by 2% this year, but up to 0.5 percentage points of that growth could be lost due to the strike, according to an anonymous official from the central bank. The economic impact could be minimal, however, unless the strike extends beyond the 18-day window.
Samsung has requested that 7,087 employees remain at their posts to maintain essential functions and prevent any damage to the production line. A court granted a partial injunction in Samsung’s favour on Monday.
The Korean government has the power to order an emergency arbitration, which would pause the strike for 30 days and allow the government to mediate the negotiations between Samsung and its union.
