Seoul: The labor union at Samsung Electronics is reportedly seeking a significant increase in bonuses, proposing that 15 percent of the company's operating profit be distributed to employees as bonuses. This comes on the heels of Samsung's announcement of an estimated first-quarter operating profit of 57.2 trillion won ($38 billion).
According to Yonhap News Agency, the union is targeting 270 trillion won in annual operating profit for Samsung's semiconductor division, suggesting that 40.5 trillion won should be allocated for employee bonuses. Initially, the union aimed to abolish the bonus cap and secure 10 percent of operating profit for bonuses, but it raised its demands following the company's record results.
If Samsung Electronics' annual operating profit reaches 300 trillion won, as some forecasts suggest, the bonuses could soar to 45 trillion won. This demand represents a stark contrast to the 11.1 trillion won in dividends paid to approximately 4 million shareholders last year, causing significant pushback from shareholders.
The proposed bonuses would also exceed the 37.7 trillion won Samsung invested in research and development last year. According to union calculations, this would translate into an average pretax bonus of 620 million won for each employee in the memory division, significantly surpassing the average bonus of 18.43 million won at large companies with 300 or more employees.
The union's demands come at a time of major global business moves, such as Nvidia's $40 billion bid for Arm, highlighting the enormity of the requested bonuses. With this scale of bonuses, Samsung could potentially engage in multiple merger and acquisition deals similar to its past $8 billion purchase of Harman International or SK hynix's $9 billion acquisition of Intel's NAND unit.
Samsung Electronics has already committed to investing over 110 trillion won this year to maintain its leadership in AI chips. With only about 7 percent of the global foundry market share, far behind TSMC, the company requires substantial investment to remain competitive not only in AI chips but also in other segments.
The union's demands risk diverting crucial investment funds away from strategic growth areas, potentially jeopardizing Samsung Electronics' position in the global AI ecosystem. The possibility of a strike further complicates the situation. Despite offering industry-leading compensation, including "special awards" that exceed the 50 percent cap on bonuses relative to annual salary, the union plans a resolution rally on April 23 and a general strike on May 21. Such actions could drive key customers like Nvidia, Tesla, and Google to competitors like TSMC.
Samsung Electronics' success in the current supercycle is largely due to its strategic investments during past downturns. A bonus splurge could lead to missed opportunities for large-scale deals and hinder the company's ability to secure leadership in emerging fields like next-generation high-bandwidth memory.
Semiconductors remain vital to South Korea's economy, accounting for 38 percent of the nation's total exports in March. As global economic uncertainties loom, South Korea must reinvest its semiconductor gains wisely. While sharing profits with employees is reasonable, an oversized allocation could compromise the company's long-term growth.
As the semiconductor supercycle nears its end amid increasing US pressure and China's rapid advancement, Samsung Electronics must prioritize sustainable growth over momentary gains. The focus should be on fostering labor-management collaboration to maintain the company's competitive edge.