Samsung Electronics' labor union entered a two-day post-mediation process starting Tuesday. Although labor and management returned to the negotiating table under government mediation, a breakthrough looks uncertain as the two sides remain far apart on issues including the criteria for semiconductor performance bonuses. At Tuesday's post-mediation meeting, the Samsung Electronics Supra-Company Union repeated its existing demands to pay performance bonuses equivalent to 15 percent of operating profit and to abolish the bonus cap set at 50 percent of annual salary. Based on this year's projected operating profit of 300 trillion won for Samsung Electronics, the demand amounts to nearly 600 million won in performance bonuses per semiconductor employee. Management said it would provide top-tier compensation combining 10 percent of operating profit with special awards, but rejected institutionalizing the abolition of the bonus cap.
If Samsung Electronics' union pushes ahead with a strike, serious production disruptions and weakened industrial competitiveness will damage the broader economy. It could also negatively affect foreign investment inflows. The American Chamber of Commerce in Korea (AMCHAM) issued an unusual statement Tuesday, noting that "if production disruptions occur at Samsung Electronics, supply pressure in the global semiconductor market will grow and concerns over supply chain stability could intensify further." AMCHAM said a recent survey showed Korea had slipped one notch to third place in global companies' rankings of preferred Asian bases, a result that reflected labor uncertainty in the semiconductor industry.
Samsung Electronics and SK hynix are riding a super-cycle driven by surging semiconductor demand born of the artificial intelligence (AI) revolution. But if the union focuses only on windfall bonuses, it could squander a prime opportunity to strengthen the company's future competitiveness. Compensation commensurate with performance is welcome, but unreasonable demands that erode corporate competitiveness are unacceptable. U.S. AI chipmaker Nvidia has adopted a compensation system known as "golden handcuffs," paying performance bonuses in stock rather than cash. Samsung Electronics would do well to consider this approach, which is expected to enhance long-term corporate value. If the strike the union has threatened materializes as is, it could inflict irreversible damage not only on Samsung Electronics as an individual company but on the entire Korean economy. To prevent that outcome, all parties including labor and management must join forces to produce a solution that the majority of the public can accept. This post-mediation negotiation is the last chance to restore public trust.
