Samsung Electronics (005930) and its union failed to reach an agreement in their final mediation session held at the Sejong Government Complex on the 20th, ultimately collapsing performance-bonus negotiations. The two sides could not narrow significant differences over paying hundreds of millions of won in bonuses to the foundry (contract chip manufacturing) and System LSI divisions, which have been posting trillions of won in losses every year. As a result, the Samsung Electronics labor union plans to begin a general strike on the 21st as scheduled.
Choi Seung-ho, head of Samsung Electronics' Supra-Enterprise Union, told members on the day, "The union will lawfully launch a general strike tomorrow as scheduled," adding, "We make clear that efforts toward a settlement will not stop even during the strike."
Management also expressed its position, saying, "We find this very regrettable." It stressed, "The company will not give up on dialogue until the last moment to prevent the worst-case scenario."
Management said, "Under no circumstances should there be a strike," explaining, "The reason no agreement was reached until the very end of the post-mediation process is that accepting the union's excessive demands as they are could shake the basic principles of company management."
The point of head-on collision between the two sides is the compensation plan for the non-memory division, which has been posting trillion-won losses every year. The union proposed dividing 15% of this year's operating profit, with 70% going to the Device Solutions (DS) division and 30% to the memory business. During the post-mediation process, it was reported that the allocation ratio had been adjusted to 60% for DS and 40% for memory.
In contrast, management maintained its position that there should be no excessive compensation for loss-making divisions. In addition to the DS division, Samsung Electronics also has the Device eXperience (DX) division, which handles smartphones, TVs, and home appliances. The DX division faces a challenging business environment this year due to Middle East conflicts and rising global oil prices. Nevertheless, the financial investment industry expects the DX division to post 4 trillion to 5 trillion won in operating profit this year.
However, if the union's demands were accepted, the non-memory division, which has been posting trillion-won losses for years, would receive hundreds of millions of won in bonuses, while it remains unclear whether the DX division — which generated trillions of won in profit — would receive any bonuses at all.
According to FnGuide, brokerage firms' consensus forecasts over the past month put Samsung Electronics' 2024 sales at about 685 trillion won and operating profit at 353 trillion won.
Assuming about 350 trillion won of this is the DS division's operating profit, accepting the union's proposal would create a bonus pool of 52.5 trillion won (15%). Of that, 36.75 trillion won (70%) would be distributed to the DS division. In this case, 78,000 members — including roughly 20,000 union members in the loss-making non-memory division — would each receive 470 million won in bonuses. The 50,000 employees in the memory division would receive the remaining 30% (15.75 trillion won), or an additional 315 million won per person.
However, the DX division would have to settle for the Overtime Performance Incentive (OPI), which is capped at 50% of base annual salary. For someone with an annual salary of 100 million won, the maximum would be 50 million won. The result would be a structure in which the loss-making non-memory division receives about 500 million won, while the DX division receives only one-tenth of that. Moreover, since the DX division's operating profit this year is expected to fall sharply from last year's roughly 12.7 trillion won, it is uncertain whether bonuses will be paid at all.
Some interpret that the Supra-Enterprise Union is refusing to back down on its demand for hundreds of millions of won in bonuses for the loss-making divisions in order to maintain its status as a "majority union" with bargaining authority and other rights. If the non-memory division is sidelined in bonus negotiations, up to 20,000 members could leave the union. The Supra-Enterprise Union, currently estimated to have about 73,000 members, would lose its majority status if roughly 10,000 members withdrew.
For this reason, management said, "Despite the company having accepted most of the union's demands on bonus size and content, the union refused to back down from demanding socially unacceptable levels of compensation even for loss-making divisions," adding, "This directly violates the fundamental management principle that 'rewards follow performance.'"
