Samsung Electronics (005930.KS) labor-management talks on performance bonuses have ended in final collapse, putting the largest general strike in the company's history on the brink. If the top production hub for semiconductors — which accounted for 36.2% of Korea's exports through April this year — grinds to a halt, the blow to economic growth, the domestic stock market, and regional economies will be unavoidable.
Samsung's labor and management declared a breakdown in post-mediation talks on the 13th at the Government Complex-Sejong, following a 17-hour marathon bargaining session that had begun the previous day. Choi Seung-ho, chair of the Samsung Electronics branch of the National Samsung Electronics Union, said, "The mediation proposal we waited more than 12 hours for was actually a step backward," declaring the negotiations had broken down.
The company said, "This is an action that causes great worry and anxiety for the employees, shareholders, and citizens who are awaiting a settlement," adding, "We will continue sincere dialogue to the very end."
Choi, however, cemented expectations of production disruptions, asserting that "more than 50,000 members will participate" in the strike scheduled for the 21st. If the union proceeds with a general strike, Samsung Electronics is highly likely to see its semiconductor lines halt for the first time in 42 years, since it began chip production with the completion of the Giheung campus in 1984. "We are not considering any additional dialogue with the company until the strike ends," Choi stressed.
If the general strike materializes, fatal damage is expected not only for Samsung Electronics but for the national economy and financial markets as a whole. The union projects roughly 30 trillion won in lost production if the general strike runs from the 21st to June 7. Additional damage running into tens of trillions of won is also feared, including the scrapping of wafers — which cost $20,000 each and are fed in at a rate of 660,000 per month — as well as equipment breakdowns.
The union's core demands include setting the performance bonus pool at 15% of this year's operating profit forecast (approximately 348 trillion won), including cash and stock compensation, and abolishing the ceiling on performance bonuses.
The government has taken the position that it will prevent a Samsung Electronics strike by any means. Prime Minister Kim Min-seok convened an emergency meeting of related ministers that day and said, "We will actively support labor-management dialogue so that this does not lead to a strike under any circumstances." Some observers suggest the government could invoke emergency arbitration powers in the event of a strike to prevent the enormous economic damage.
