Labor unrest threatens to drag on Korea's manufacturing growth momentum

Union members from Samsung Electronics stage a protest in front of its plant in Pyeongtaek, Gyeonggi Province, April 23. Korea Times photo by Shim Hyun-chul

Korea’s manufacturing sector faces mounting risks of losing growth momentum, as extraordinary earnings in the semiconductor industry fuel a wave of aggressive wage demands from unions across other sectors.

What began as isolated wage negotiations among a handful of chipmakers has rapidly evolved into a broader “compensation war,” raising concerns that the country’s industrial ecosystem could be fundamentally undermined.

At the center of the controversy is Samsung Electronics, whose union has threatened to launch a strike later this month unless the company removes its cap on performance-based bonuses, mirroring a precedent set by SK hynix last year.

Both firms have posted record-breaking earnings amid a global boom in artificial intelligence, which has sharply driven up demand for memory chips. The surge in profitability has, in turn, intensified calls for greater employee compensation.

The dispute at Samsung has drawn rare public criticism from within the government. President Lee Jae Myung and Industry Minister Kim Jung-kwan have both voiced concerns that the union’s demands appear "excessive," warning of broader economic repercussions.

Union members from Hyundai Motor physically clash with security officials, as they attempt to enter the front gate of the carmaker's plant in Ulsan, April 22. Yonhap

Their remarks highlight growing unease even within a pro-labor administration that increasingly assertive union activity may erode corporate competitiveness.

The ripple effects have been swift and far-reaching. The union at Hyundai Motor has proposed distributing 30 percent of the company’s 2025 net profits as bonuses, even as the carmaker reported a roughly 20 percent drop in its operating profit last year following tariff shocks from the United States.

Unions in other sectors, including LG Uplus and Hanwha Aerospace, have joined the movement, pressing management to eliminate bonus ceilings. Industry officials describe the phenomenon as a growing “benchmarking effect” in which unions demand comparable compensation regardless of differences in profitability or productivity.

“Each company has distinct earnings outlooks and revenue structures, but unions across major conglomerates often overlook these differences in wage negotiations,” an industry official said. “This trend risks weakening the long-term competitiveness of Korea’s key industries.”

Tensions are also intensifying in other firms. At LG Electronics, a white-collar union has staged protests against what it calls unilateral cost-cutting measures by management, including changes to compensation systems and workforce policies.

SK hynix's subcontract workers hold a protest in front of the chipmaker's factory in Cheongju, North Chungcheong Province, Thursday. Yonhap

Compounding the situation is the implementation of the so-called “yellow envelope law,” a revision to labor regulations that expands workers’ rights. The law enables subcontractor unions to directly seek compensation from primary contractors, effectively broadening the scope of labor disputes.

This has emboldened subcontracted workers to argue that their labor underpins the profits of major firms, thereby justifying demands for a share of earnings from main contractors. A notable example is HD Hyundai Heavy Industries, where subcontracted workers have intensified pressure on management over bonus payments for retired employees.

Industry observers warn that such developments could trigger a chain reaction across supply chains.

Disruptions at leading firms, such as Samsung Electronics or Hyundai Motor, could halt operations at thousands of their smaller suppliers, given the continuous production cycles in semiconductors and the just-in-time manufacturing systems used in the automotive sector.

“For instance, the automaker’s earnings outlook remains uncertain this year due to lingering tariff impacts, but its militant union shows no signs of scaling back demands,” another industry official said. “This may end up weakening the firm’s global competitiveness.”