Wage negotiations between Samsung Electronics and its labor unions have broken down after the company offered a 6.2% pay increase and expanded benefits, but unions insisted on removing the cap on performance bonuses.
According to industry sources on Monday, Samsung Electronics notified employees that "we regret failing to reach a final agreement despite eight rounds of main negotiations since December last year, six days of intensive bargaining, and mediation procedures." The company added that "we feel a heavy sense of responsibility for not reaching a wage agreement."
Samsung explained the negotiations collapsed because "the union repeatedly demanded the removal of the cap on the Occasional Performance Incentive (OPI)."
Management and the joint union bargaining committee have been conducting wage negotiations since December but failed to narrow their differences. The parties entered mediation procedures with the National Labor Relations Commission on April 20, but those talks also broke down on the night of May 3. The unions are demanding removal of the bonus cap, transparency in bonus calculation criteria, and a 7% wage increase.
In response to demands for transparency in bonus calculations, Samsung proposed allowing employees to choose whichever formula is more favorable: 20% of Economic Value Added (EVA) or 10% of operating profit.
For wage increases, Samsung offered 6.2%—higher than last year's 5.1%—along with 20 company shares per employee, higher salary caps by position, reduced fixed overtime hours, housing loans up to 500 million won, 1 million points in company store credit, expanded long-service leave, and childbirth congratulatory payments up to 5 million won. For employees in the Device Solutions (DS) semiconductor division, which saw significantly improved results, Samsung offered an additional 100% OPI payment if operating profit reaches 100 trillion won.
The key issue remains the bonus cap removal. While Samsung maintains its offer is "unprecedented," the union's repeated demands for eliminating the bonus ceiling prevented any agreement.
"Simply removing the OPI cap would temporarily benefit certain business units, but the majority of divisions where exceeding OPI targets is realistically difficult would inevitably feel relative deprivation and alienation," Samsung said, expressing concerns about worker-versus-worker conflicts and weakened organizational unity.
Currently, the memory business is booming while foundry and non-memory (System LSI) operations remain in the red. The mobile business has also contracted significantly due to rising memory costs. Similar equity issues could arise when memory faces a downturn.
Industry observers warn that unlimited performance bonuses could reduce R&D investment funds and undermine Samsung's technological competitiveness. Semiconductors require massive and timely R&D and facility investments; if funds are regularly diverted to bonuses, the company could lose momentum for future reinvestment.
"If the union holds the company hostage with annual strikes and threats of astronomical losses, Samsung will inevitably fall behind in global markets," an industry source said. "Now is the time for labor-management cooperation to overcome the crisis, not selfish demands."
The union reportedly sent members an email stating that "during a strike, the company loses 10 trillion won while employee losses are around 400 billion won." Critics suggest the union may be deliberately inflaming labor-management tensions to gain negotiating leverage.
The joint bargaining committee has initiated procedures to secure the right to strike. The committee plans to announce reasons for suspending mediation and its dispute response plan, including a strike vote, through a live broadcast Monday. After conducting a vote among members, strike actions including full or partial work stoppages become possible if a majority of registered members approve and more than half of all members participate. Whether negotiations resume and the level of industrial action will depend on labor-management talks and the vote results.