Industrial action in escalating chip war fuels concern
A group of union members at Samsung Electronics launched an indefinite strike on Wednesday, raising fears about the potential impact on the tech giant as a global chip war escalates between rivals including Taiwan, the US and Japan. Led by the National Samsung Electronics Union (NSEU), this is the first strike in the company’s 55-year history. There was previously a strike from July 8 to 10 and a planned but modified strike from July 15 to 19.
The NSEU said the collective action was inevitable because the company showed no intention to negotiate with the union during the initial negotiations. The union is demanding an annual wage increase of 6.5 percent and a rebalancing of year-end bonuses. The purpose of the current strike is to cause a “production disruption,” the union said. A total of 6,540 workers are participating in the strike, of which 5,211 are from semiconductor manufacturing and equipment.
The company denied until Thursday that it had suffered losses from the strike, although continued disruptions could be inevitable. This comes at a crucial time for Samsung as it is poised to take advantage of a semiconductor supercycle after sluggish performance last year. Despite a deficit of as much as 15 trillion won ($10.9 billion) in 2023, Samsung’s chip unit delivered an earnings surprise in the second quarter of this year.
Currently, the chip manufacturer’s semiconductor production lines are running around the clock, with 70,000 workers working in three shifts a day. Given the specifics of the chip industry, any interruption in production would result in huge losses.
Despite its recent rise in profits, Samsung is battling stiff competition. The company has fallen behind SK Hynix in the high-bandwidth memory (HBM) market, a key area for the growing artificial intelligence (AI) industry. Samsung has yet to sign a deal to supply HBMs to Nvidia, the leader in the global AI chip market. In addition, Samsung faces the challenge of closing the gap with Taiwan’s TSMC in the foundry business, which recently led to a CEO change.
Given the semiconductor industry’s crucial role in the national economy, the ongoing strike could have serious implications for both Samsung and Korea’s economic health. Amid fierce global competition in the chip market, where major countries are battling for dominance, the strike at Samsung Electronics – Korea’s largest company – could derail the chipmaker’s attempts to restore confidence among customers and investors, various international media outlets pointed out.
The recent recovery of the semiconductor industry will become a major turning point that will determine the winners and losers in the global chip market depending on how they respond to the challenges. Any failure to address these challenges will hurt both unionized workers and the company.
While workers have the right to strike, they must consider the broader impact of their actions on the global chip war. TSMC, Samsung’s arch-rival in the global market, has made significant inroads into the foundry market, becoming the world’s largest foundry company by market capitalization.
Samsung reports that only 3,000 of its 70,000 employees are participating in the strike. But both the union and the company must understand that shareholders may view the situation differently. Now it is time for the union activists to look for ways to end the strike while the company looks for amicable solutions.
The current recovery of the semiconductor industry is a crucial moment to determine the fate of chipmakers based on their response to these challenges. It is imperative for both sides to meet halfway and end the dispute soon. Together, they must roll up their sleeves and redouble their efforts to strengthen the company’s competitiveness and survive in the increasingly fierce global competition.
