More than 47,000 Samsung Electronics workers walked off the job Thursday after the company rejected a mediation proposal from South Korea's National Labor Relations Commission, launching an 18-day strike at the world's largest memory-chip maker and sending the company's shares down 3%.
The walkout amounts to 38% of Samsung's workforce, with the majority concentrated in its chip division. The Bank of Korea estimated this week that a general strike at Samsung could cut 0.5 percentage points from South Korea's economic growth this year, with losses reaching roughly 30 trillion won ($20 billion).
What broke down
The union had accepted the government mediator's final proposal, but Samsung did not. Choi Seung-ho, the union's spokesperson, said Wednesday that the company had initially requested more time, then at 11 a.m. local time stated that "no decision has been made," triggering the impasse. "We express deep regret that the post-mediation process was terminated due to the delay in management's decision-making," Choi said.
Samsung said the talks fell through as "accepting the labor union's excessive demands as they are could undermine the fundamental principles of company management," according to a company statement published by South Korean media.
What workers want
The union is seeking performance bonuses equal to 15% of Samsung's annual operating profit, the elimination of a bonus cap currently set at 50% of a worker's annual salary, and a formalized bonus structure. Samsung historically capped bonuses at 50% of salary, meaning employees have not shared proportionally in the company's recent semiconductor profits.
"These are huge numbers; they could potentially mean millions of dollars of payouts for many employees at Samsung," said Kamil Dimmich, partner and portfolio manager at North of South Capital. Dimmich noted the union's 15% demand exceeds the 10% rate workers at rival SK Hynix accepted.
A South Korean court partially granted Samsung's request for an injunction, barring the union from taking over company facilities and requiring that staffing levels be maintained in some essential production units.
The counterpoint
Portfolio manager Gary Tan of Allspring Global Investments told Reuters the supply-chain impact should remain contained unless the strike drags on. "The bigger effect is on market sentiment and longer-term memory industry pricing structure, reinforcing cost pressures," said Tan, whose fund holds Samsung shares. Dimmich warned that permanently removing the bonus cap would create a lasting drag on Samsung's profitability, once the current chip boom fades: "This boom will not last forever. At some point, supply and demand will normalize, and memory prices will come down."
South Korea's labour ministry said Wednesday it was too early to invoke an emergency arbitration order, which could suspend the strike for 30 days. "There is still time left for dialogue between labour and management," ministry spokesperson Hong Kyung-ui told reporters. Samsung said it "will not give up on dialogue until the last moment," and insisted talks must continue.