Samsung Electronics union, management resume talks with labor minister present

Minister of Employment and Labor Kim Young-hoon, center, attends an extra round of negotiation between Samsung Electronics' labor and management at Gyeonggi District Employment and Labor Office in Suwon, Wednesday. Courtesy of Ministry of Employment and Labor

Samsung Electronics' labor and management resumed talks over performance-based bonus payment systems at 4 p.m. Wednesday, with Labor Minister Kim Young-hoon attending the negotiation session.

This came about four hours after the two sides failed to reach an agreement in their talks mediated by the National Labor Relations Commission (NLRC), and the company’s labor unions said they would proceed with an 18-day strike on Thursday as planned.

The latest talks were not mediated by the NLRC, and the minister was attending to assist the talks, according to the Ministry of Employment and Labor. The talks' outcome was not announced as of 10 p.m.

At around 11 a.m., the company’s labor and management ended their negotiations without an agreement despite extended talks in the NLRC-arranged mediation session that began Monday.

Union leader Choi Seung-ho claimed that the unions had agreed to the mediation proposal presented by the NLRC, but the company continued to stick to its position, prompting the NLRC to eventually end the session.

The unions expressed their intention to go ahead with the strike as planned. “The unions will lawfully enter a strike tomorrow as scheduled,” he said. “We also make clear that we will not stop efforts to reach an agreement even during the strike period.”

Samsung Electronics expressed its regret for the breakdown, but blamed the unions for their "excessive demands."

"The talks failed because accepting the unions’ excessive demands could undermine the company’s basic management principles," the company said in a statement.

"Despite the company accepting most of the proposed performance bonuses, the unions did not back down from demanding compensation for loss-making business departments at a level that would be socially difficult to accept."

The company was referring to the allocation of performance-based bonuses within the chipmaking Device Solutions (DS) division, which was one of the main points of contention.

Samsung Electronics labor unions' leader Choi Seung-ho, listens to reporters question after ending a mediation session with the company's management at the National Labor Relations Commission in Sejong, Wednesday. Joint Press Corps

The unions have been demanding that the company allocate 15 percent of its operating profit for performance bonuses. For the DS division, the unions have proposed distributing 70 percent of the performance bonus pool equally across all semiconductor departments, while allocating the remaining 30 percent based on each department’s performance.

The company opposed this, saying the division's foundry and chip design businesses are still struggling to narrow losses, and increasing the ratio of equal distribution would undermine the company’s performance-based compensation principles.

“The company believes that abandoning these principles could negatively affect not only our company, but also other businesses and industries,” the company said, adding it will continue efforts to settle the dispute.

Amid the situation, President Lee Jae Myung criticized the unions.

"It is understandable that some workers seek to pursue their interests, but there should also be a reasonable line," Lee said during a Cabinet meeting.

He said receiving a share of operating profit is for investors and shareholders, adding that the government also contributes to the growth and development of certain companies by offering tax cuts, supporting facilities and providing diplomatic support.

"Even investors cannot expect systems to share operating profit before taxes, which can be considered the public’s collective share," he said. "To be honest, I do not understand it."

Cheong Wa Dae also expressed its "deep regrets" over the failure of the talks, with an official urging the two sides to "consider the strike's impact on the national economy and make their best efforts until the last moment."

The unions planned to go on strike on Thursday, with more than 48,000 union members as of 3 p.m. Wednesday expressing their intention to join the walkout. Since a local court on Monday partially granted Samsung Electronics’ injunction request to block a full strike, minimum staffing levels will be maintained for deterioration prevention and safety-related operations during the strike period, but supply disruptions are still expected.

Reportedly, the company has received inquiries from global clients regarding the potential impact of the strike on semiconductor supply, while rumors have even circulated that Nvidia may refuse to accept products manufactured during the strike period.

The government has been reviewing a plan to invoke a compulsory arbitration measure that would suspend the strike and force labor and management into arbitration procedures.

The "emergency arbitration of industrial action" is one of the strongest tools the government can use to handle labor disputes. If a strike is deemed likely to harm the national economy or disrupt citizens’ daily lives, the labor minister can invoke the emergency measure, immediately suspending collective action for 30 days.

It not only halts strikes but also effectively forces labor and management into a settlement process, in which both sides are required to resume mediation sessions. If that mediation fails, the case moves to a binding arbitration process with the NLRC. At that stage, both sides must accept the commission’s compromise plan, and no legal appeal is permitted.

A stop sign is seen at Samsung Electronics' office in Seocho District, Seoul, Wednesday. Yonhap

Samsung Electronics is stepping up its preparations for containing the fallout from the strike. According to the court ruling, at least 7,087 employees should continue working on wafer deterioration prevention and safety-related operations during the strike period.

Even if the government invokes emergency arbitration measures, heavy losses are still expected. Industry officials estimate that the strike could incur losses of 1 trillion won ($663 million) per day, and if the walkout continues for the full 18 days, the total losses could reach as high as 100 trillion won.

The recent momentum in Samsung Electronics’ profitability could also be affected.

Samsung Electronics posted an operating profit of 57.2 trillion won for the first quarter, up 756 percent from a year earlier, driven by soaring demand for its memory chips.

In the semiconductor industry, on-time delivery is critical, and production disruptions caused by the strike could shift increased memory demand toward rivals such as SK hynix and Micron. Disruptions to Samsung’s supply could also trigger a sharp spike in DRAM prices.