Samsung workers threaten strike over AI bonus split

The threat, motivated by internal divisions over who should receive the profits generated by artificial intelligence (AI) boomputs the manufacturing of fundamental memory chips for AI data centers, smartphones and notebooks at direct risk.

The imminent strike results from the board’s proposal to pay bonuses up to six times greater for the 27 thousand employees in the memory sector in relation to workers in other areas.

The union disputes the disparity, arguing that the remaining 23,000 professionals should not be left behind. The workers in question are located in the chip manufacturing and design divisions, responsible for producing AI components for customers such as Nvidia and Tesla.

Salary disparity leads to talent drain and strikes could cost Samsung billions

Financial projections indicate a strong global and regional economic impact if the strike is completed.

The financial services company JPMorgan estimates that the strike could affect the operating profit of Samsung in a range between 21 trillion and 31 trillion won (around R$70 billion to R$104 billion), in addition to causing direct sales losses estimated at approximately 4.5 trillion won (R$15.1 billion).

In an official statement sent to the press, Samsung warned that failure to meet logistical deadlines with its commercial partners will result in a “complete loss of confidence” in the market.

The agenda of demands presented by the union demands the definitive abolition of the bonus cap of 50% of annual salaries and the mandatory allocation of 15% of the company’s annual operating profit to a common fund distributed to workers.

Union representatives warn that the gap in bonuses demotivates technical staff in the chip sector and accelerates the loss of specialized professionals, which would make the president, Jay Y. Lee’s public goal of leading this niche market by 2030, unfeasible.

“If the memory division receives 500 million won while the manufacturing division only receives 80 million won, what motivation would these employees have to continue working?” asked union leader Choi Seung-ho during the negotiation rounds, according to transcripts obtained by Reuters.

On the other hand, Samsung’s negotiators firmly defend that corporate performance bonuses must follow strict criteria of merit and real profitability of each sector.

“They, the chip business, recorded losses in the trillions of won, and honestly, if it weren’t for our company, they probably would have gone bankrupt or closed down,” said Samsung executive and negotiator Kim Hyung-ro, according to written records of the meetings reviewed by the news agency.

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The executive added by questioning how it would be possible to justify the payment of performance bonuses to a division whose facilities and ongoing investments are entirely funded by the money raised by the memories division.

The threat of a strike was motivated by internal divisions over who should receive the profits generated by the artificial intelligence boom – Image: IA/Shutterstock

Employees’ internal dissatisfaction intensified after the main local competitor, SK Hynixabolishing its salary cap for ten years, which resulted in bonuses three times larger than Samsung’s. This has caused a stampede of engineers in recent months.

“I participated in the protest because I’m angry. I can’t just sit in the office and work”, he said to Reuters a chip researcher with 30 years of experience, identified only as Lee. “I’m not proud of Samsung anymore,” said the worker, who revealed that he had applied for a job at North American competitor Micron.

Market analysts point out that maintaining such distinct operations under the same unified structure, in Samsung’s attempt to be the only integrated supplier in the world, generates severe governance friction.

“Samsung must empower factories to become self-reliant,” said Namuh Rhee, a professor at Yonsei University and president of a South Korean corporate governance group.

The labor impasse escalated into the political sphere, drawing criticism from South Korean President Lee Jae Myung, who called the demands of certain unions excessive.

From an institutional and market point of view, the risk of jurisprudence concerns other industrial sectors in the country.

“If Samsung sets a precedent in which the union’s demands are pushed through a strike, the companies could find themselves in a very unfavorable bargaining position in the future,” said Korea University law professor Park Ji-soon.