More than 45,000 workers of Samsung Electronics are gearing up for a major labour strike on Thursday, May 21.
South Korea's government became involved, but initial talks regarding the pay and bonuses of the workers failed. Tuesday witnessed further discussions with labour union representatives, as the world's largest memory chipmaker stares at a complete breakdown of its manufacturing capacity starting Thursday.
The union estimated that an 18-day strike could cost Samsung about 30 trillion won, or roughly $20 billion. On April 23, the labour unions managed to have 40,000 workers hit the roads, which led to a 58% drop in foundry production and an 18% decline in Samsung’s memory production that day.
Why are Samsung workers planning a strike?
Samsung workers are reportedly planning to go ahead with the 18-day strike if Samsung refuses to abolish a bonus cap of 50% on annual salaries, allocate 15% of annual operating profit to a bonus pool shared by workers, and formalise this in contracts. In other words, the workers are seeking performance bonuses equivalent to 15% of Samsung’s operating profit, a CNBC report said. While the AI bloom is benefiting the company, the workers on the lower strata are not receiving any benefit, they complained.
According to Reuters, South Korean Prime Minister Kim Min-seok said on Sunday the government would pursue all options, including emergency arbitration, to prevent a strike. The government and the judiciary became involved because Samsung Electronics makes up 12.5% of the country’s GDP, and any disruption to chip manufacturing could have worrying economic impacts.
An emergency arbitration order, which can be invoked by the labour minister if it is deemed that a dispute is likely to harm the economy or daily life, immediately prohibits industrial action for 30 days whilst the National Labor Relations Commission conducts mediation and arbitration.
The union has said it will not give in to pressure regarding arbitration and will not agree to a pay deal should the company offer a less favourable proposal. South Korea is worried that if the talks fail and the workers go on strike, “the economic losses we will face will be beyond imagination.”
Will Samsung Galaxy devices get costly due to the strike?
Meanwhile, South Korean shares erased early gains to turn higher on Monday, as chipmaker Samsung Electronics jumped on a court decision regarding a planned labour strike.
In the short term, the prices of Samsung gadgets are unlikely to go up, reports said. This is because major tech manufacturers like Samsung maintain a safety buffer of existing retail inventory, a report explained.
It is also noteworthy that the strike mainly threatens Samsung’s semiconductor operations. If the chip prices rise, the market price of products using those components—including Samsung phones and PCs—but retail prices usually lag by months, not days.