Samsung union increases pressure on pay with three-day strike

(Bloomberg) — More than 6,500 workers at Samsung Electronics Co. walked off the job on Monday to rally for better wages, the start of the largest organized labor action in the South Korean conglomerate’s 50-year history.

Most read by Bloomberg

Disgruntled workers and union supporters gathered in the pouring rain outside one of Samsung’s largest chip manufacturing complexes south of Seoul. Wearing red headbands reading “total strike” and black raincoats, they chanted slogans and sang songs with their fists raised. Union leaders, who announced initial turnout figures, hope the high-profile protest will spark a three-day strike that will send a message to Korea’s biggest company.

Samsung’s main union has been preparing for the strike for weeks after negotiations over pay and vacation entitlements failed last month. The planned action represents an escalation from a one-day strike in early June – the first in Samsung’s 55-year history. The strikes are intended to send a message by disrupting production at one of the company’s most advanced chip factories, union leaders say.

The union had planned to gather up to 5,000 people for a rally outside Samsung’s factory in Hwaseong, about 38 kilometers south of Seoul, Lee Hyun-kuk, the union’s deputy secretary general, told Bloomberg News on Friday. It is unclear how many workers will actually walk out in the next few days, and markets have remained calm so far. The company’s shares were largely unchanged on Monday morning.

Still, the unprecedented action at Samsung risks damaging the country’s best-known and richest company – and triggering similar reactions across the tech industry. Many of those who showed up to work on Monday were chip manufacturing workers, according to the union.

“Our goal with this strike is to disrupt production,” said union leader Son Woo-mok.

Samsung cannot afford turbulence within its own ranks or production outages at a critical time. The company is now pulling out all the stops to convince Nvidia Corp. to use its high-end AI memory chips – a prerequisite for making a bigger claim on a booming AI market. In May, the head of its semiconductor division was abruptly replaced, and since 2023 SK Hynix Inc. has dominated the crucial area of ​​high-bandwidth memory chips (HBM).

The story goes on

This week, Samsung is preparing to unveil new foldable phones and watches, as well as a smart ring, ahead of the Paris Olympics to forestall a challenge from Apple Inc. to its global market leadership. But Samsung is benefiting from an expected recovery in global demand for storage and electronics from historic post-Covid lows: The company reported a 15-fold increase in profits on Friday, albeit from very low levels in 2023.

Samsung representatives have not commented since Friday.

“The timing of this strike is particularly critical as it coincides with ongoing challenges in the semiconductor supply chain,” said Billy Leung, investment strategist at Global X Management Co., a member of Mirae Asset Financial Group. Samsung has about 20% of the global DRAM market and about 40% of NAND flash, which is used in smartphones and servers. “Any disruption in Samsung’s operations could have a ripple effect.”

Samsung Electronics has long been spared the turmoil that has plagued many of Korea’s leading companies, from Hyundai Motor Co. to Ssangyong Motor Co. In the past, labor disputes have occasionally turned violent. Analysts say one reason for Samsung’s success is the tight control of labor activists that helped the company dominate the electronics sector for more than a decade from its Suwon base. Lee Kun Hee, the late Samsung chairman and father of current chief Jay Y. Lee, went to great lengths to prevent the formation of unions.

Now the National Samsung Electronics Union – the largest of the technology giant’s several unions with over 30,000 employees – says the situation is escalating due to the failure of collective bargaining, after initially seeking a less dramatic solution.

Union leaders have been urging their members to participate in the upcoming maneuver for weeks. Samsung tried to derail that plan on Thursday by announcing performance-based bonuses for semiconductor workers for the first half of the year. However, the promised 75 percent of monthly salary fell far short of the usual payout for a full month in the past.

“Because managers are contractually bound, they mainly care about short-term performance and goals,” says Park Seol, a 35-year-old woman who works at the Samsung complex in Pyeongtaek. “We stand up for what is best for the company.”

Higher wages and additional paid leave are now at the heart of the dispute. Union leaders last week amended their demands to include their entire cohort, after initially saying they wanted a bigger pay rise for around 855 staff who had not agreed to a 3% annual base pay increase.

Other issues include bonuses linked to Samsung’s increased profits. The chip workers did not receive these last year when their division lost around 15 trillion won. According to union leaders, they fear that they could miss out again this year, even if the division returns to profit.

Samsung calculates these bonuses using a complex formula that subtracts the cost of capital from operating profit and adjusts for taxes on a cash basis. The union is calling on the company to simply use operating profit like some of its competitors – or to be more transparent in determining these figures.

Bonuses traditionally make up a significant portion of an employee’s salary, so foregoing them can mean a significant reduction in compensation.

– With support from Shinhye Kang.

Most read by Bloomberg Businessweek

©2024 Bloomberg L.P.