What are Samsung union workers demanding and how might strike play out?

The logo of the Samsung Electronics is seen during a media tour at Samsung Electronics' headquarter in Suwon, Gyeonggi Province, Jun. 13, 2023. AP-Yonhap

SEOUL — Korean memory chip maker Samsung Electronics is facing its worst-ever strike, with nearly 48,000 workers threatening to walk off production lines on Thursday for 18 days over a dispute about bonus payouts.

Here are key things to know:

What does Samsung's union want?

Samsung's union has asked the company to abolish a cap that limits bonuses to 50 percent of annual salaries and to allocate 15 percent of annual operating profit to a bonus pool that would be distributed to workers. It also wants Samsung to make the changes binding beyond this year.

Samsung made a very different offer.

Transcripts of negotiations between the union and Samsung showed that in March, Samsung cited estimates that some staff at smaller rival SK hynix could receive bonuses equivalent to 607 percent of their annual salary and proposed that its memory chip workers would gain a bonus exceeding levels that SK hynix workers receive.

Samsung also proposed bonuses of 50 percent to 100 percent for staff in its logic chip businesses.

These bonuses, however, would be a one-off payment for this year. In principle, it does not want to abolish the cap on bonuses at 50 percent of annual salaries.

What is driving this?

Samsung and SK hynix have seen profits balloon to record highs thanks to a global shortage of memory chips amid the boom in artificial intelligence. The two companies account for the majority of global memory production.

Last year, SK hynix abolished its cap on bonus pay for 10 years, media reports said. This resulted in bonuses more than three times higher than those offered to Samsung workers, prompting many to jump ship for SK hynix and sparking a surge in union membership, according to Samsung's union.

How might the strike play out?

The strike promises to be far larger and more damaging than the last walkout to affect Samsung in 2024, when about 6,000 workers took part.

Samsung's union says that nearly 48,000 employees, the majority of them chip workers, have signed up to participate. That represents 38 percent of Samsung Electronics' domestic work force.

A court on Monday partially granted Samsung's request for an injunction, ruling that essential staffing levels at some production facilities must be maintained during any industrial action. Samsung has notified the union that this will require 7,087 workers to report for work even if the strike goes ahead.

The company's chip factories in Korea operate 24 hours a day across three shifts in locations such as Pyeongtaek and Hwaseong.

Why is this strike causing such concern?

The strike threatens to dent the supply of memory chips at a time of severe shortages.

Samsung is the world's largest maker of DRAM chips, commanding 36 percent of the market as of the end of last year, according to research firm TrendForce. Memory chips, key components in laptops and smartphones, have become essential building blocks for AI data centres.

KB Securities analyst Jeff Kim has estimated that an 18-day strike could disrupt global supplies of DRAM memory by 3 percent to 4 percent and NAND memory by 2 percent to 3 percent, which would likely fuel further price increases.

Korean government officials have also warned about the impact of a strike as Samsung accounts for nearly a quarter of Korea's exports.

An official at Korea's central bank has said that a strike could, in a worst-case scenario, shave 0.5 percentage points off a forecast 2.0 percent expansion in the Korean economy this year.

This assumes that around 30 trillion won ($19.9 billion) of chip production could be lost and that there might be an additional "few weeks" of disruption to production, the person said.