In a last-minute reversal, Samsung Electronics Co. reached a tentative deal with its labor union, averting a potentially crippling strike that had been scheduled to start Thursday at the world’s largest memory chipmaker.
CSOP SK Hynix Daily 2x Leveraged Product up 19%; CSOP Samsung Electronics Daily 2x Leveraged Product up 9%.
The South Korean company said in a statement late Wednesday that “labor and management have reached a tentative agreement on wages and the collective bargaining agreement.” The company’s union also confirmed suspension of plans for a strike that had been planned for May 21 to June 7. Samsung’s stock rose as much as 7.6% in Seoul, while the benchmark Kospi gained more than 6%.
The truce averts what could have been a damaging strike for Samsung and the tech industry. The Korean giant is the world’s biggest supplier of the memory chips that go into everything from smartphones and electric vehicles to the AI data center servers that power services like ChatGPT and Claude. Shortages in the memory chip sector have already driven prices sharply higher in recent months, and disruptions at Samsung could have exacerbated the squeeze.
“The tentative agreement between labor and management is positive news from the perspective of reducing uncertainty,” said Ha SeokKeun, chief investment officer at Eugene Asset Management.
Days of back-and-forth brinkmanship and high-pressure negotiations led to the tentative settlement. On Wednesday morning, labor leader Choi Seung-ho said the work stoppage would go ahead after Samsung’s management rejected a proposal from government mediators that the union had accepted.
Korea’s government — deeply invested in the outcome because of Samsung’s importance to the country’s economy — made one last appeal as Labor Minister Kim Young-hoon called the two sides together for evening talks. About 90 minutes before midnight local time, the parties reached a provisional deal.
Under terms of the proposal, Samsung will begin a special performance bonus system that would reward workers in the semiconductor division based on profitability. The 10-year bonus scheme will include ambitious profit targets of 200 trillion won ($133 billion) per year from 2026 to 2028, and 100 trillion won from 2029 to 2035.
Samsung’s union told members they will be able to vote on the proposed 2026 wage agreement from 2 p.m. on May 22 to 10 a.m. on May 27.
Simmering Tensions
The strains between management and labor showcased simmering tensions across the country as workers push for a greater share of the profits that companies like Samsung and SK Hynix Inc. are deriving from a global AI infrastructure boom. Samsung is on track to become one of the world’s most profitable firms this year, with its semiconductor arm posting a 48-fold jump in profit for the March quarter.
The union had earlier demanded that Samsung scrap an existing bonus cap, allocate 15% of its operating profit to worker bonuses and formalize those terms in employment contracts. Labor leaders pointed to SK Hynix, which last year agreed to allocate 10% of annual operating profit to a performance bonus pool.
Samsung had proposed allocating 10% of operating profit to bonuses, along with a one-time special compensation package that exceeds industry standards. Company executives argued that the union’s demands would be difficult to sustain over the long term.
Under the new compensation structure, Samsung will keep its existing bonus system and add a new scheme for the chip division funded by 10.5% of profit which will be paid in stock, according to the company. The bonus pool will be split between different levels of the organization, with 40% allocated to the division and 60% to individual business units.
Instead of cash, employees will receive the bonus in stock, after tax. They can sell a third of those shares immediately, while the rest of the shares will have to be held for up to two years.
In addition to the new bonuses, Samsung agreed to an average wage increase of 6.2% this year, along with improved child support payments and housing loans.
The deal, however tentative, will likely come as a relief to company management and investors.
“Due to concerns surrounding the potential strike, Samsung has become significantly undervalued relative to SK Hynix,” said Ha of Eugene Asset Management. “We expect a strong rebound in Samsung’s share price.”
