Samsung Electronics (005930.KS) posted a record operating profit of 57.2 trillion won ($41.8 billion) in the first quarter, but its Device eXperience (DX) division is understood to have contracted due to the impact of "chipflation." A general strike threatened by labor unions, led by semiconductor division members, has emerged as a key variable for future earnings. Prolonged conflict between the United States and Iran raising concerns about damage to the global economy adds further uncertainty.
The DX division's first-quarter operating profit is estimated at around 4 trillion won, down approximately 7% year-on-year, according to financial investment industry sources on the 7th. Despite the first quarter being a peak season with flagship product launches, rising costs driven by chipflation weighed on earnings. Prices of key components such as mobile DRAM (LPDDR) surged more than 80% quarter-on-quarter, but the company was unable to fully pass on the increases to selling prices, leading to a decline in profit margins, analysts said.
The gap between labor and management has widened further since the record earnings announcement. The joint union struggle committee said the same day that operating profit this year is projected to exceed 270 trillion won and reiterated demands for the complete abolition of the performance bonus cap, currently set at 50% of annual salary. Management offered a 6.2% wage increase, 20 shares of treasury stock per employee, and measures to increase transparency in bonus calculation criteria, but the two sides failed to reach an agreement.
Following the breakdown in negotiations, the union will hold a large-scale rally on the 23rd of this month. A general strike lasting 18 days is also planned from the 21st of next month through June 7. The strike would involve DX division union members, who account for approximately 29% of total employees, as well as the Device Solutions (DS) division. If the strike proceeds, disruptions are inevitable to semiconductor production lines that have entered a recovery phase and to production schedules for new products including foldable phones in the second half.
Prolonged tensions in the Middle East adding downward pressure on the global economy is also cited as a burden for Samsung Electronics.