SEOUL, South Korea — Workers at Samsung Electronics, the world’s largest manufacturer of memory chips, have extended their strike indefinitely in a bid to pressure the company into negotiating over pay and holiday conditions. The National Samsung Electronics Union (NSEU), representing about 25 percent of Samsung’s 125,000-strong South Korean workforce, initiated the strike after unsuccessful attempts to engage the company in dialogue.
Historic Strike
This strike marks a significant moment in Samsung’s 55-year history, which until a recent one-day strike last month, had seen no labor strikes despite a strong labor movement in South Korea. The open-ended strike follows a three-day walkout last week and is aimed at addressing grievances over pay and holiday conditions.
Union Leverage
The union, founded in 2019, holds considerable leverage, with approximately 90 percent of its members working in device solutions, a critical area for chip production. The union leadership has warned that the strike will gradually impact chip production. Currently, around 6,500 workers are participating in the strike.
Focus on AI Chips
The union plans to target not only DRAM and NAND chips, where Samsung holds a dominant global position, but also high bandwidth memory (HBM) chips, which are crucial for artificial intelligence (AI). Samsung is heavily investing in HBM to compete with its Taiwanese rival, TSMC, in the AI market.
Economic Impact
The strike comes at a crucial time for Samsung, which is showing signs of a turnaround after several years of declining sales and revenue. In April, Samsung reported a first-quarter operating profit of 6.61 trillion won ($4.8 billion USD), a 932.8 percent increase from the previous year’s first quarter.
Despite the positive earnings, Samsung continues to struggle with an overdependence on traditional memory chips and a stagnant smartphone market. The global AI boom has started to benefit Samsung’s HBM, NAND, and DRAM chips, providing a much-needed boost.
Challenges in AI Market
As recently as May, Samsung’s HBM chips had yet to pass tests for use in AI chipsets by Nvidia, a leading U.S. chip designer, raising concerns about Samsung’s position in the rapidly expanding AI market.
Smartphone Market Dynamics
Samsung’s flagship smartphone, the Galaxy, recently overtook Apple’s iPhone as the world’s bestseller, largely due to opportunities in the Chinese market amid political tensions between China and the U.S. This achievement underscores Samsung’s ability to adapt to a fast-changing global tech scene.
Historical Context
In the late 1980s, Samsung shifted from being an imitator of Japanese firms to establishing itself as a global brand. This transformation was supported by significant investments and the recruitment of top talent, making Samsung employees some of the highest-paid in South Korea.
Work Culture and Compensation
Samsung’s work culture has historically emphasized hard work and high pay. However, the union is now demanding a 3.5 percent wage increase and better holiday pay. A major point of contention is the metric for incentive pay, known as economic value added (EVA), which affects between 30 and 50 percent of total compensation.
EVA Controversy
EVA, calculated as after-tax operating profit minus capital costs, can decrease incentive pay for individuals when a firm invests or borrows heavily. Samsung’s EVA formula remains confidential, adding to employee dissatisfaction. In 2023, many employees saw their compensation drop despite Samsung’s memory chip line operating in the red, while executives received substantial pay increases. CEO Han Jong-hee’s total compensation rose by 49 percent to 6.9 billion won ($5.2 million) without explanation.
Future of the Strike
As the strike continues, its impact on Samsung’s chip production and overall operations will be closely watched. The outcome may significantly influence labor relations within South Korea’s largest company and beyond.
