Nearly 50,000 Samsung Workers to Strike in South Korea Over Bonus Caps

South Korean chipmaker Samsung Electronics is confronting one of the most serious labor strikes in its history, a protest that could disrupt the broader economy and the company’s global semiconductor supply chain.

The company’s labor union announced that more than 48,000 workers will stop work Thursday for 18 days to demand changes to bonus payments.

Samsung Electronics, a major driver of South Korea’s economy, generates revenue equivalent to about 12.5 percent of the country’s gross domestic product.

The strike raises concerns about potential economic fallout and chip shortages.

The union demands that Samsung abolish a bonus cap currently set at 50 percent of annual salary and instead allocate 15 percent of the company’s annual operating profit to bonuses.

According to local media, the union has pointed to smaller rivals such as SK Hynix, which pays higher bonuses to workers.

Samsung Electronics has defended its compensation system.

In a statement, the company said the union made “unacceptable demands,” including bonus requests for loss-making units.

The two sides held government-mediated talks Wednesday but failed to reach an agreement.

Union leader Choi Seung-ho said Wednesday the union accepted a final proposal from a government mediator, but the 18-day strike will proceed because management did not yield on one remaining issue, Reuters reported.

“I would like to apologise to the public for not being able to produce a good result despite making as many concessions as possible,” Choi said.

“We will not cease our efforts to reach a deal even during the strike,” he added.

Samsung Electronics said that “accepting the labour union’s excessive demands would undermine the fundamental principles of company management.”

Worker strikes at Samsung were rare until recently. In June 2024, the company faced its first-ever industrial action after months of pay negotiations, when some workers struck for one day and held a protest in Seoul, chanting: “Respect labour! We are not wanting a 6.5 percent raise or a 200 percent bonus!”

Samsung had offered a 5.1 percent pay raise for the year, but the union demanded a 5.6 percent increase, an extra day of annual leave, and transparent, performance-based bonuses.

On July 8, 2024, thousands of workers went on strike, initially for three days but extending to August 1, when it largely fizzled. Additional strikes have occurred since then.

With talks collapsing, about 48,000 Samsung Electronics employees plan to strike for 18 days starting Thursday. This represents 38 percent of the company’s workforce, with most in its chip division.

Samsung is the world’s largest producer of memory chips, used in laptops, computers, and data centers.

The strike threatens to disrupt chip production, and the government fears it could harm South Korea’s economy. The tech giant’s revenues equal about 12.5 percent of GDP.

The Bank of Korea, the central bank, estimated this week that a general strike at Samsung could cut 0.5 percentage points from Korea’s economic growth this year. The bank estimated losses at about 30 trillion won ($20 billion) and said restoring production in the memory chip line, if halted completely, would take weeks.

On Sunday, Prime Minister Kim Min-seok warned that if the strike proceeds, “the economic damage we would face would be unimaginable.”

On Monday, South Korea’s Yonhap news agency reported that a court partially granted Samsung’s request for an injunction to block the strike. The Suwon District Court ordered that staffing levels for essential production units be maintained and barred the union from taking over company facilities.

Gary Tan, a portfolio manager at Allspring Global Investments, told Reuters the impact on supply chains should remain limited unless the strike is prolonged.

“The bigger effect is on market sentiment and longer-term memory industry pricing structure, reinforcing cost pressures,” said Tan, whose fund holds Samsung shares.

In South Korea, the government can invoke an emergency arbitration order to stop the strike for about 30 days. However, this requires unions and companies to restart talks mediated by the National Labor Relations Commission.

The government can resort to such an order if a strike would cause “significant injury to the national economy.”

If mediation fails, the next step involves an arbitration panel that hears both sides and issues a binding decision.

Anyone refusing to comply with the panel’s ruling faces up to two years in prison or a 20 million won ($13,300) fine.

The last time the measure was invoked was in 2005, when Korean Air pilots walked off the job but agreed to a compromise pay raise after four days.

Yonhap reported Wednesday that a labor ministry spokesperson said it is too early to invoke such an order.

“There is still time left for dialogue between labour and management,” Hong Kyung-ui, a ministry spokesperson, told journalists at the government complex in Sejong when asked about the possibility of the order.

“It is still too early to specifically speak of that,” he added.