Samsung Strike Deal Averts Walkout, Sparks Bonus Backlash Across Affiliates

Samsung Electronics Co. avoided an immediate threat to semiconductor output after management and labor reached a tentative agreement just before a general strike. The accord is now stirring broader discontent across the group, with employees at key affiliates objecting to widening gaps in pay and bonuses.

Industry officials said on May 25 that Samsung Electronics and its union reached a tentative agreement on May 20 centered on the creation of a new special management performance bonus system. Under the proposal, if the company posts 300 trillion won ($218 billion) in operating profit this year, memory business employees in the Device Solutions, or DS, division earning an annual salary of 100 million won ($72,700) would receive about 550 million won ($400,000) in stock-based special bonuses. Combined with the existing excess profit incentive, or OPI, total performance pay would reach about 600 million won ($436,000).

The flashpoint is that non-memory units such as System LSI and foundry, which are forecast to post losses this year, would still receive 40% of the DS division's common bonus pool. That would give them at least 160 million won ($116,000) in special management performance bonuses.

Including the DS division's common OPI, their total payout would top 200 million won ($145,000).

As news of the agreement spread, frustration and a sense of deprivation quickly rippled through workers at major affiliates including Samsung Display Co., Samsung SDI Co. and Samsung Electro-Mechanics Co. Internal discontent has grown so intense that employees are circulating the self-deprecating term "Samsung huja," suggesting they are treated as second-tier compared with Samsung Electronics, according to industry officials.

By wage increase rate, Samsung Display matched Samsung Electronics this year at 6.2%, while Samsung Electro-Mechanics was at 5.9% and Samsung SDI at 4%. The way bonuses are calculated has also become a source of contention.

Under the new agreement, Samsung Electronics' DS division will change its OPI formula from economic value added, or EVA, to 10% of operating profit. Affiliates still use the EVA standard.

Samsung Electro-Mechanics posted more than 600 billion won ($436 million) in operating profit in 2023, but its OPI payout rate was only 1% of annual salary, prompting a strong internal backlash. For entry-level employees, that came to about 500,000 won ($364). The rate remained at 5% to 6% in 2024 and 2025. With the semiconductor supercycle expected to help lift operating profit to around 1.5 trillion won ($1.09 billion) this year, demands for larger bonuses are poised to intensify.

Samsung SDI is also grappling with internal unrest, people familiar with the matter said. The company posted zero OPI last year after a slump in electric-vehicle demand hit results, and employees are comparing that with Samsung Electronics, where even loss-making divisions stand to receive bonuses worth more than 100 million won.

That has pushed discussions over bonus system reform to the forefront at several affiliates. Samsung Display's union plans to discuss introducing an alternative bonus compensation system with management in the second half of this year. Samsung Electro-Mechanics also plans to gather employee views on changing its OPI formula to either 20% of EVA or 10% of operating profit.

Industry officials are also warning that the use of strike pressure to win concessions, after surfacing at SK Hynix Inc. and now Samsung Electronics, could spread across the broader group. The union at Samsung Biologics Co. is already on strike, while Samsung C&T Corp.'s construction division raised its wage increase proposal to 4.3% from 3% to conclude talks and avoid a walkout.

An industry official told Yonhap News Agency that the Samsung Electronics labor agreement had weakened Samsung's long-standing performance-based pay principle of rewarding results. Because Samsung Electronics' personnel and compensation systems are typically extended to affiliates after a lag, other affiliate unions will be hard to keep from pressing bonus-related demands, the person added.

Another industry official said that even inside affiliates that have already finished this year's wage negotiations, opinion is forming around whether workers should strike as well. That leaves the group at risk of severe labor-management friction every year during wage bargaining season.

Shin Yong-hyun, Hankyung.com reporter yonghyun@hankyung.com