Samsung hits record high amid union strike threat

Samsung shares rose 4.8% to a record high on April 23, 2024, but the company underperformed rival SK Hynix by more than 25 percentage points as a union threatened an 18-day strike starting May 21, according to Bloomberg. The union is demanding 15% of the chip division’s operating profit, rejecting management’s offer of a 10% bonus pool and 6.2% wage increase.

Strike Threat and Negotiation Status

Samsung’s union formally threatened the 18-day strike over compensation demands. Citigroup cut its price target on April 30, citing potential bonus costs associated with labor negotiations. Samsung said it would continue negotiations and aim to limit production disruption.

SK Hynix Uncapped Bonus as Competitive Pressure

The strike threat followed SK Hynix’s decision to drop its bonus cap and set aside 10% of annual operating profit for performance payouts. That plan could give SK Hynix staff average bonuses of about US$477,000 this year, with some forecasts putting next year’s figure near US$900,000, according to the report.

The compensation gap is already affecting retention. About 200 Samsung employees reportedly moved to SK Hynix over the past four months for better compensation.

Broader Economic and Industry Implications

A prolonged strike could lead major clients including Nvidia and AMD to spread orders to steadier suppliers such as TSMC, the world’s largest contract chip manufacturer, potentially weakening Samsung’s market share over time.

The labor dispute extends beyond Samsung. Unions at Hyundai Motor and other large South Korean companies are seeking similar profit-sharing plans, spreading pressure across industries. The Bank of Korea has expressed concern over what it calls a “K-shaped” economy, where the tech sector pulls away from the rest of the economy. Online backlash has also grown as observers argue that windfalls tied in part to state-funded infrastructure and tax credits should be shared more widely.