Samsung Electronics bonus agreement approved, strike averted

Samsung Electronics Executive Vice President Yeo Myung-gu, left, and Samsung Electronics labor unions leader Choi Seung-ho sign a wage agreement during a ceremony in Yongin, Gyeonggi Province, Wednesday. Courtesy of Samsung Electronics

More than 70 percent of Samsung Electronics’ labor union members on Wednesday approved a tentative wage agreement reached between union leaders and management, bringing a monthslong dispute over performance bonuses to a close, at least for now.

According to the unions, 55,333 of the 57,332 eligible members of the Samsung Electronics Labor Union (SELU) participated in the vote, with 44,606 voting in favor of the agreement, for an approval rate of 80.6 percent. At the National Samsung Electronics Union (NSEU), 7,283 out of 8,261 members voted, with 1,536 approving the agreement, translating to an approval rate of 21.1 percent. The combined approval rate stood at 73.7 percent, surpassing the majority threshold required for ratification.

The tentative agreement was signed on May 20, just hours before the unions were set to stage a general strike the following day. Voting on the agreement was conducted from May 22-27.

“Though there were some disappointments during the wage negotiations, I believe labor and management reached a meaningful agreement after continuing dialogue and discussions over a long period of time,” SELU Chair Choi Seung-ho said during an official signing ceremony of the agreement in Yongin, Gyeonggi Province, following the announcement of the voting results.

“We will continue striving to improve working conditions and protect the rights and interests of Samsung Electronics employees.”

Samsung Electronics Executive Vice President Yeo Myung-gu said labor and management “will work together to strengthen the company’s global competitiveness,” adding, “I would like to thank the labor union and employees for engaging in the negotiations sincerely and not giving up on dialogue until the very end.”

Expressing regret over the controversy surrounding its prolonged labor dispute, Samsung Electronics said in a separate statement that it will raise a 5 trillion won ($3.33 billion) fund over the next five years to invest in fostering "a healthy industrial ecosystem for mutual growth."

The company said it is currently considering measures such as support for smaller partner firms, industrial accident prevention funds and industry-academia cooperation programs, adding that the specific contribution plans will be finalized through discussions with its board and the company’s compliance committee.

The wage agreement centers on a special management performance bonus offered exclusively to employees in the chip-making Device Solutions (DS) division. Under the agreement, the bonus will be funded with 10.5 percent of the company’s operating profit and paid out in treasury shares.

More than 80 percent of SELU members, mostly comprising employees from the DS division, voted for the deal. NSEU, which saw an increase in members from the device-making Device Experience (DX) division after the tentative agreement was reached, saw much lower approval. The differences in voting patterns is largely attributed to DS benefiting more than other divisions from the bonus performance distribution.

Samsung Electronics Company Union (SECU), the third-largest labor union, which primarily represents employees from the DX division, also conducted its own vote on the agreement, and 8,909 members voted against the deal while 47 voted in favor. However, the result was not reflected because SECU had withdrawn from the joint negotiations.

SECU filed a court injunction on Tuesday seeking to halt the voting process and plans to file a separate lawsuit to invalidate the agreement, which could potentially affect the settlement.

Amid backlash from DX division employees, Roh Tae-moon, Samsung Electronics CEO and head of the DX division, told employees on Wednesday that “many of you likely felt a sense of deprivation and disappointment toward the company,” adding that he will concentrate on “restoring the DX division’s competitiveness and putting it back on a path of growth.”

People walk into Samsung Electronics' office in Seocho District, Seoul, Wednesday. Yonhap

As the labor dispute comes to a tentative end, Samsung Electronics’ outlook for the second quarter and the second half appears increasingly bright. Shinhan Securities analyst Kim Hyung-tae projected the company’s operating profit to reach 89.9 trillion won in the second quarter of this year, with the DS division accounting for 87.6 trillion won.

“Supply for memory chips is expected to remain below demand at least through 2027,” Kim said. “Improvements in the foundry business also remain possible, given better manufacturing yields and expanded new orders starting in the second half of the year.”

One remaining concern is the company’s outlook in the long term, going beyond 2028. During the negotiation process, labor and management publicly disclosed negotiation terms stating that the 10.5 percent bonus would be paid annually from 2026 to 2028 if the DS division achieves 200 trillion won in operating profit, while the threshold would fall to 100 trillion won starting in 2029.

This suggests that the company does not expect to maintain the same level of profit beyond 2029, raising the possibility that the current supercycle in the memory chip market could peak out by then.

The year 2029 is widely expected to mark the first slowdown in the current wave of capital spending by tech firms. It also coincides with the completion of large-scale semiconductor fabs currently under construction by both Samsung Electronics and SK hynix.