Suranjana TewariAsia sales correspondent
Bloomberg via Getty Images
Samsung Electronics’ largest union has suspended a planned strike after reaching a last-minute tentative deal with the South Korean tech giant.
That temporarily allayed fears of disruption at the world’s largest memory chip maker during the boom in artificial intelligence (AI) data center construction.
The union, which represents almost 48,000 workers, said industrial action due to begin on Thursday would be suspended while members vote on the May 22-27 deal.
Here’s why a strike could be so disruptive for the global tech industry.
What is the dispute about?
The dispute centers on how to distribute the profits generated by the growing demand for AI memory chips.
The issue is the distribution of bonuses between the staff of the memory chip divisions and those of other units.
Samsung had planned to pay generous bonuses to 27,000 employees making memory chips, at least six times more than its employees making other chips and electronic devices.
The union said the 23,000 workers who made less advanced chips for companies like Tesla and Nvidia should not be left behind.
This has raised concerns about a potential disruption to chip production, with major implications for global supply chains and South Korea’s export-driven economy.
Samsung is the world’s largest memory chip maker by sales and a major supplier of chips used in AI data centers, smartphones and laptops.
The Samsung Group as a whole accounts for about a fifth of South Korea’s economic output.
The dispute comes at a sensitive time for the company, as it faces growing competition from rivals SK Hynix and Micron, amid growing demand for AI-based chips that has already strained global supply.
What did Samsung say?
Samsung’s operating profit between January and March jumped about 750% from a year earlier.
Growing demand for AI chips pushed its stock market valuation past $1 trillion (£744 billion) in May.
Last year, rival SK Hynix abolished its premium cap for 10 years.
This led to bonuses more than three times those offered to Samsung employees. As a result, some Samsung employees jumped ship to SK Hynix.
Samsung then proposed that memory chip workers receive bonuses equivalent to 607% of their annual salary – higher than those at SK Hynix – according to transcripts of wage negotiations seen by Reuters.
But employees of other companies would only receive bonuses of 50 to 100%, according to the documents.
The union also wanted Samsung to remove the bonus cap of 50% of annual salaries and allocate 15% of annual operating profit to a bonus pool distributed to workers.
Samsung bosses had previously signaled that the strike could have a broader impact on the South Korean economy, due to falling sales, investment outflows and lower tax revenue.
In the statement released after reaching the tentative agreement, the company said: “With a humble attitude, we will build a more mature and constructive labor-management relationship to ensure that such an incident never happens again.” »
On Thursday, Samsung shares rose more than 8% after the announcement, while South Korea’s Kospi stock index also jumped more than 8%.
What impact could a strike have?
Such a strike could impact Samsung’s operating profit by 21-31 trillion won ($14.08-20.79 billion; £10.4-15.4 billion), according to JP Morgan.
But any withdrawal is expected to be limited, after a South Korean court granted an injunction to Samsung Electronics.
The court said staffing levels necessary to protect safety, prevent damage to facilities and maintain product quality must remain at normal levels, in order to avoid damage to facilities and production.
It also prohibited the union and its leader from occupying or locking down company facilities and preventing workers from entering them. The union would face fines of $74,000 per day if it does not comply with this order.
“In today’s interconnected global economy, disruptions in strategically important sectors can create ripple effects that extend far beyond a single company or market,” the American Chamber of Commerce in Korea said.
“Competing regional manufacturing markets could benefit if concerns about predictability and continuity persist.”
