Samsung chip workers reject $340,000 bonus, demand annual share of AI profits as strike looms

Samsung chip workers reject $340,000 one-time bonus, demand annual payouts like SK hynix's $900,000 -- workers want share of AI windfall, impending 18-day strike could cost Samsung up to $11.7 billion

Samsung semiconductor workers want a bigger slice of the AI pie. Negotiations between the National Samsung Electronics Union, which represents workers in the company's chipmaking division, and management have seemingly broken down over a single issue. According to the Financial Times, the two sides are close to agreeing on an allocation of 13% of operating profit, which works out to be roughly $340,000 USD per employee, as a bonus to the workers. However, company management is only willing to give this as a one-time offer, while the union wants the allocation to be guaranteed annually and included in the agreement that the two sides will sign. The issue about the bonus was brought to national attention when more than 30,000 Samsung workers took to the streets in late April to demand a bigger slice of the profits that Samsung is making from the AI infrastructure buildout. This demand stemmed from a comparison with SK hynix workers, who were guaranteed bonuses of $477,000 each this year, and almost doubled to $900,000 next year. Furthermore, these bonuses are guaranteed for the next ten years. The massive amount stemmed from the windfall that the memory and storage chip manufacturer is making from the AI infrastructure build-out, with AI data centers and hyperscalers willing to pay a premium just to secure the chips they need. The workers argue that even though Samsung is much larger, their bonuses only equate to less than 30% than what SK hynix offers to its people. Their initial demand was a 15% cut in the semiconductor fab's operating profit, a removal of the 50% bonus cap, and a 7% wage hike, while management countered with a 10% allocation, a 6.2% pay increase, and other benefits like preferential mortgage rates. It seems that the two sides have finally settled on the 13% bonus allocation, and the only question remaining is whether management will agree to a guaranteed annual bonus. Samsung is facing the threat of a massive strike if the two parties fail to come to an agreement. The union said that it will conduct a general strike from May 21 to June 7 -- meaning Samsung's chip fab operations will be crippled for at least 18 days. It should be noted that the single-day action in April resulted in a 58% drop in production for just a single shift. Prof. Kwon Seok-joon of Sungkyunkwan University told the Financial Times that an action like this could cost Samsung somewhere between $6.9 billion and $11.7 billion in direct losses, with an even larger amount in indirect costs. Furthermore, it will damage Samsung's reputation as a supplier for HBM4 chips, especially with the tight competition between the three major memory and storage chip manufacturers. Kwon also noted that it's harder for Samsung to just grant the bonus, even if it comes from operating profits and not revenue. Unlike SK hynix, which is a standalone fab, Samsung's semiconductor fab operates under the larger Samsung Electronics company, which itself is part of the larger Samsung Group. Other arms of the company are said to be struggling because of the higher costs brought about by the chip shortage, even as the semiconductor division is making record profits. If the fab workers get their desired bonus, workers from less profitable divisions might feel that they're being short-changed. Because of this, a smaller union, whose members mostly come from Samsung's smartphone, TV, and home appliances lines, has reportedly pulled out of the planned joint strike. Should management grant the semiconductor division's demand for a bonus allocation of 15% of operating profits, Kwon told FT that "the maths gets uncomfortable fast." Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.

Samsung workers demand bigger slice of surging AI profits

Samsung Electronics is locked in a feud with its workers over how to share the spoils of the AI-driven semiconductor boom, with unions threatening to call a strike if the chipmaker does not increase wages and bonuses. Two Samsung unions are demanding the company pay out 15 per cent of each division's operating profits to workers, as well as raise wages by 7 per cent. They have threatened an 18-day walkout starting on May 21 if these demands are not met. The dispute comes at a time of surging demand for semiconductors, especially the advanced high-bandwidth memory chips, made by Samsung and others, that AI companies need to run their data centres. On Wednesday Samsung Electronics' stock market value hit more than $1tn after its shares surged more than 14 per cent to an all-time high. Net profit soared to a record Won47.2tn ($32.6bn) in the first quarter, almost six times higher than the figure in the same period a year ago. Almost all of the profits were earned by the semiconductor division. Samsung Electronics staff are now demanding a share. Last month, 40,000 workers rallied outside Samsung's factory complex in Pyeongtaek, 70km south of Seoul. A strike could disrupt global supply chains at a time when memory chip supply is tight. A rush by AI companies to sign long-term contracts with chipmakers has pushed up prices for other customers, including makers of consumer electronics. Kwon Seok-joon, a professor at Sungkyunkwan University in Seoul, estimated an 18-day walkout would cost Samsung between Won10tn and Won17tn in direct losses, but "the bigger damage is indirect". Samsung is trying to build up a contract chipmaking business and to establish itself as a trusted supplier of HBM4 chips to Nvidia. There would also be ripple effects on the 1,700 smaller companies that supply Samsung. The Bank of Korea estimates about half of the country's first-quarter GDP growth of 1.7 per cent was attributable to chipmaking. Samsung Electronics and its rival SK Hynix account for more than 40 per cent of the value of the Kospi index. Management and unions are close to agreement on the amount of bonuses to be paid. A person familiar with the situation said Samsung had offered to allocate about 13 per cent of operating profit. The main sticking point is whether the bonuses are enshrined in company rules and paid out every year. Woo Ha-kyung, acting chair of the National Samsung Electronics Union, said negotiations had broken down because management had only made a one-off offer rather than including bonuses in contracts as the unions wanted. Samsung said it would "continue to make efforts to reach an agreement with the union". Samsung Electronics' situation contrasts with that of SK Hynix, the other major South Korean chipmaking beneficiary of the AI boom, which has agreed to set aside 10 per cent of operating profit for workers for the next decade. For SK Hynix's workers, the rewards are potentially lucrative. Broker Meritz Securities forecasts SK Hynix will make Won250tn in operating profit this year. A tenth of this sum distributed among 35,000 employees would mean an average payout of about Won700mn (about $475,000) each. A mid-level Samsung worker "might make Won90mn per year and get Won45mn in bonuses but, at Hynix, you'd get a bonus of Won250mn or Won300m", said Park Jun-young, a former Samsung semiconductor worker who now writes about the industry. "It's a huge difference." One Samsung worker who plans to join the strike said that they hoped "the treatment of graduates from the nation's top engineering universities would improve, and that the company would proactively uphold its value of 'talent first'. However, based on what I have observed since joining the company, I believe it is time to take action." The worker did not want their name to be published. Another thorny issue is Samsung's corporate structure. Unlike Hynix, which is purely a chipmaker, Samsung also makes appliances, televisions and smartphones -- businesses that are increasingly struggling because of the sky-high chip prices that are enriching the semiconductor division. The firm has a "One Samsung" philosophy that divisions should co-operate rather than compete with each other, but this approach would be undermined if workers from the semiconductor division -- which is earning the lion's share of group profits -- received higher, formula-based rewards. One smaller union whose members are mostly in the division making smartphones, TVs and home appliances pulled out of the joint strike action on Monday. If the semiconductor division "gets 15 per cent of operating profit, the maths gets uncomfortable fast", Kwon said, in a reference to the disparities that would be created. In the long run, Kwon said he expected either a "spin-off in some form" or the semiconductor division becoming a "quasi-autonomous 'company within a company'" with its own pay incentives. Additional reporting by Song Jung-a