Samsung strike on hold as workers push for AI bonus
The largest union at Samsung Electronics has suspended a planned strike after reaching a last-minute tentative pay agreement with the South Korean technology giant.
This development has temporarily eased concerns over potential disruptions at the world's largest memory chipmaker amid a surge in the construction of artificial intelligence (AI) data centres.
The union, representing nearly 48,000 workers, announced that the industrial action scheduled to begin on Thursday would be suspended while members vote on the proposed deal from 22-27 May.
Below is an explanation of why a strike could have significant consequences for the global technology industry.
What is the dispute about?
The core of the dispute involves the distribution of profits generated by the soaring demand for AI memory chips.
The disagreement focuses on how bonuses should be allocated between employees working in memory chip divisions and those in other units.
Samsung had planned to award substantial bonuses to 27,000 employees involved in manufacturing memory chips—amounting to at least six times the bonuses given to workers producing other types of chips and electronics.
The union argued that the 23,000 workers producing less advanced chips for companies such as Tesla and Nvidia should not be excluded from such benefits.
Concerns were raised about potential disruptions to chip production, which could have major implications for global supply chains and South Korea's export-driven economy.
Samsung is the world's largest memory chipmaker by sales and a key supplier of chips used in AI data centres, smartphones, and laptops.
The broader Samsung Group contributes approximately one-fifth of South Korea's economic output.
This dispute arises at a sensitive time for the company as it faces increasing competition from rivals SK Hynix and Micron, amid a surge in AI-driven chip demand that has already strained global supply.
What has Samsung said?
Samsung's operating profit for the January to March quarter surged about 750% compared to the same period last year.
The booming demand for AI chips pushed Samsung's stock market valuation past $1 trillion (£744 billion) in May.
Last year, competitor SK Hynix removed its bonus pay cap for 10 years, resulting in bonuses more than three times higher than those offered to Samsung employees. This led some Samsung workers to move to SK Hynix.
Samsung subsequently proposed that memory chip workers receive bonuses equivalent to 607% of their annual salary—higher than SK Hynix—according to transcripts of wage negotiations obtained by .
However, employees in other business units would receive bonuses ranging from 50% to 100%, according to the documents.
The union also demanded that Samsung abolish the bonus cap of 50% of annual salaries and allocate 15% of annual operating profit to a bonus pool to be distributed among workers.
Samsung executives previously warned that a strike could have broader economic impacts on South Korea, including reduced sales, investment outflows, and lower tax revenue.
Following the tentative agreement, Samsung issued a statement saying:
"With a humble attitude, we will build a more mature and constructive labour-management relationship to ensure that such an incident never happens again."
On Thursday, Samsung's shares rose by more than 6% after the announcement, while South Korea's Kospi stock index increased by over 7%.
What impact could a strike have?
A strike could reduce Samsung's operating profit by between 21 trillion won and 31 trillion won ($14.08 billion to $20.79 billion; £10.4 billion to £15.4 billion), according to JP Morgan.
However, any walkout is expected to be limited after a South Korean court granted Samsung Electronics an injunction.
The court ruled that staffing levels necessary for safety protection, prevention of facility damage, and maintenance of product quality must be maintained at normal levels to avoid harm to facilities and production.
Additionally, the court prohibited the union and its leader from occupying or locking company facilities and from obstructing workers from entering them. The union would face fines of $74,000 per day if it violates the order.
The American Chamber of Commerce in Korea commented on the situation:
"In today's interconnected global economy, disruptions in strategically important industries can create ripple effects extending well beyond a single company or market."
"Competing regional manufacturing markets could benefit if concerns over predictability and continuity persist."
