Taiwan's TSMC, the world's largest foundry (contract chip manufacturer), is accelerating its investment of more than 20 trillion won to develop a site for next-generation semiconductor production. After residents who had opposed the project due to land expropriation recently reversed their stance, TSMC restarted the Longtan Science Park Phase 3 expansion project in Taiwan, which had been stalled for three years. The core of the project is mass production of chips at the angstrom scale (one ten-billionth of a meter), moving beyond the existing nanometer (one-billionth of a meter) unit. TSMC will invest at least 23 trillion won ($16.9 billion) in Longtan, which is emerging as a hub for future advanced processes, to build a next-generation nano-process chip plant.
For Samsung Electronics (005930.KS) to win the advanced chip race against TSMC, it must invest on a larger scale and at a faster pace. However, concerns are rising over potential investment setbacks as Samsung Electronics' labor union is making unreasonable demands to abolish the cap on performance bonuses and pay out bonuses equivalent to 15% of operating profit, or up to 45 trillion won. The total bonus amount the union is demanding exceeds Samsung Electronics' annual research and development (R&D) spending and is four times its shareholder dividends last year. The union has threatened to launch an 18-day general strike starting on the 21st of this month if its demands are not met.
If the union were demanding reasonable compensation from Samsung Electronics, which posted record first-quarter earnings this year, it could not be blamed. However, claiming 15% of this year's operating profit as an entitled bonus and threatening a strike goes beyond common sense. Citigroup's recent downward revision of Samsung Electronics' target price from 320,000 won to 300,000 won, citing union risk, is a stern warning from the market that complacency in the boom cycle without preparing for the "post-high bandwidth memory (HBM)" era could invite a crisis.
Excessive profit-sharing that disregards future investment could undermine not only Samsung Electronics but also the nation's future competitiveness. Taiwan's TSMC, as well as U.S. memory maker Micron Technology, are aggressively expanding their investments to secure future competitiveness. Micron announced it will raise this year's capital expenditure from $20 billion to $25 billion. Alphabet, Microsoft, Tesla and Meta are also pouring an astronomical $618 billion this year to gain the upper hand in artificial intelligence (AI). Chinese chipmakers, the biggest challengers, have already closed in on Samsung. What is needed now is not conflict over distribution but efforts to find a path of labor-management cooperation for future investment.
