Wage negotiations between Samsung Electronics (005930) and its labor union have broken down after the union refused to back down from its demand to abolish the ceiling on performance bonuses.
The elimination of bonus caps—a policy adopted by SK Hynix—would create equity issues among Samsung Electronics' diverse business divisions and weaken investment capacity, yet the union has maintained its position.
According to industry sources on June 4, Samsung Electronics told employees: "We regret that we could not 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: "We feel a heavy sense of responsibility for failing to conclude wage negotiations."
The company specifically noted that the union "repeatedly demanded the abolition of the cap on Overachievement Performance Incentive (OPI)" as the reason for the breakdown.
Management and the joint union bargaining team have been conducting wage and collective bargaining negotiations since December but failed to narrow their differences. Mediation procedures through the National Labor Relations Commission began on May 20 but also collapsed the previous night. The union is demanding abolition of the bonus cap, transparency in calculation criteria, and a 7% wage increase.
According to internal notices, Samsung Electronics proposed allowing employees to choose between "20% of Economic Value Added (EVA)" or "10% of operating profit"—whichever is more favorable—for OPI calculation transparency.
Regarding wage increase demands, the company offered a 6.2% raise (higher than last year's 5.1%), along with 20 company shares per employee, higher salary caps by position, reduced mandatory overtime hours, housing loans up to 500 million won, 1 million points for the company mall, expanded long-service leave, and childbirth congratulatory payments up to 5 million won. For semiconductor (DS) division employees benefiting from significantly improved performance, an additional 100% OPI payment upon achieving 100 trillion won in operating profit was included.
The company stated it presented unprecedented generous terms, but negotiations failed as the union repeatedly demanded bonus cap abolition. Samsung Electronics expressed concern: "Simply abolishing the OPI cap may temporarily benefit some divisions, but the majority of divisions that realistically struggle to achieve OPI targets will inevitably feel relative deprivation and alienation."
Within semiconductors alone, the memory business is enjoying a boom while foundry and non-memory (System LSI) operations remain in the red. The mobile division also faces margin pressure from rising memory costs. Conversely, similar equity issues could emerge when the memory division faces downturns.
Industry observers warn that uncapped bonuses could reduce R&D investment funds and undermine Samsung Electronics' technological competitiveness. Semiconductors require massive R&D and facility investments at the right time; if funds are systematically diverted to bonuses, reinvestment capacity for the future could be lost. An industry official said: "If the union holds the company hostage by threatening annual strikes and astronomical losses, Samsung Electronics will inevitably fall behind in global markets. Now is the time for labor-management cooperation to overcome crisis, not selfish demands."
The union reportedly sent members an email stating: "In case of a strike, the company loses 10 trillion won while employee losses are around 400 billion won." This has prompted criticism that the union may be excessively inflaming labor-management conflict to gain negotiating leverage.
The joint bargaining team announced: "As of this hour, we are transitioning to a joint struggle headquarters system and initiating procedures to secure dispute rights." The team plans to announce reasons for mediation suspension and dispute action plans, including a strike vote, through a live broadcast on June 5.
Following a strike authorization vote among members, industrial action including full or partial strikes becomes possible if more than half of registered members approve and more than half of total members participate. Whether negotiations resume and the level of industrial action will be determined by labor-management talks and voting results.