Samsung’s union puts off strike after reaching last-minute wage deal with management

SEOUL, South Korea (AP) — Samsung Electronics’ labor union said Wednesday it’ll hold off on launching a planned strike and put a tentative wage deal with management to a vote, alleviating immediate concerns about the operation of the world’s largest memory chip maker.

The announcement was made after a last-minute government-mediated negotiation with management over how much bonus payouts must be provided to employees to reflect soaring profits fueled by the global boom in artificial intelligence.

Union leader Choi Seung-ho told a televised briefing that the union agreed not to go ahead with an 18-day strike that he earlier said would start from Thursday. He said union members will vote on the tentative agreement from May 22-27.

“We would like to express our apologies to the people for causing concerns due to our internal conflicts,” Choi said. “The agreement is the result of our all-out struggle spanning about six months.”

Choi’s negotiating partner and senior Samsung official, Yeo Myounggoo, told the briefing that the company hopes that the agreement will be a starting point for more stable relations with the union.

“The company will faithfully implement the terms of this agreement and will make its utmost efforts to promote labor–management cooperation,” he said.

Government officials earlier had threatened to invoke rarely used emergency powers to force a settlement at Samsung, as its union’s strike was feared to rattle global semiconductor supplies and the country’s trade-dependent economy. The union represents more than 70,000 workers.

Earlier Wednesday, the union and the management held each other responsible for a failure to reach a deal, after their previous round of negotiation ended without a breakthrough. Choi accused management of refusing to accept a government-mediated proposal whose details he refused to disclose. The management accused the union of calling for excessive compensation packages for workers at loss-making units.

Samsung and its cross-town rival, SK Hynix, together produce about two-thirds of the world’s memory chips, which are seeing surging demand driven by AI. Samsung said last month its operating profit for the January-March quarter jumped eightfold to a record 57.2 trillion won ($38 billion).

Union leaders have demanded a compensation structure in which Samsung would commit to spend 15% of its annual operating profit on employee bonuses and scrap bonus caps, which are currently set at 50% of annual salaries. The company says the demands are excessive, citing the highly cyclical nature of the semiconductor business.

Samsung and union leaders did not immediately confirm the details of their tentative agreement. Yeo suggested that the company had agreed to union demands to extend bonuses beyond its lucrative memory division to less profitable units.

“For example, we need to invest in the future of both our memory and foundry businesses. These engineers all work in semiconductor production, and we discussed ways to better motivate them,” he said.

Prime Minister Kim Min-seok, the government’s No. 2 official after President Lee Jae Myung, said in a televised statement Sunday that the strike could cause up to 100 trillion won ($66 billion) in economic damage by disrupting Samsung’s highly complex semiconductor manufacturing processes.

The planned strike could potentially have had a major global impact.

Given that supply in the global memory semiconductor market is struggling to keep up with demand, the Samsung strike would have been expected to further drive up prices and push back AI infrastructure investments in other countries, said Lee Jun, an expert at the Korea Institute for Industrial Economics and Trade.

The strike could have hurt operations of Samsung’s production of smartphones and other consumer electronics as well, observers say.

A local court on Monday partially granted the company’s request for an injunction against the planned strike, ruling that the union must maintain certain staffing levels to prevent damage to facilities and materials and ensure safe operations. The Suwon District Court also barred unionists from occupying key facilities and offices.