By Kwanwoo Jun
Samsung Electronics' management and its union leaders reached a tentative bonus-pay agreement at the 11th hour, averting a strike at the world's largest memory-chip maker.
The agreement came late Wednesday, just hours before the potentially disruptive industrial action at the company was set to begin. Both sides, which had failed to agree at talks earlier in the day, struck the deal in follow-up negotiations mediated by South Korea's labor minister.
The union said it will suspend its May 21-June 7 strike until further notice, as union members will vote on the tentative deal on May 22 through May 27.
Both sides were able to narrow differences by making concessions to each other, Labor Minister Kim Young-hoon told a televised press briefing at an employment and labor office in Suwon, south of Seoul. Kim didn't elaborate on the deal. The television footage showed both management and union leaders signing the tentative agreement and shaking hands at the briefing.
At previous talks, negotiators had failed to agree over how Samsung's huge profits should be shared.
The union demanded that the company allocate 15% of its annual operating profit to employee bonuses, but management rejected the call because it would exceed the company's bonus cap, currently set at 50% of annual salary. Union leaders also called for the cap to be removed, a demand company executives likewise turned down.
Samsung's management had also said that it couldn't accept the union's demands, which include performance-based bonuses even for employees at its unprofitable business units.
Both sides had been under mounting pressure to strike a deal, as the South Korean government had earlier warned that it could invoke emergency mediation powers to stop the strike for a month and force a settlement if negotiations fail.
Earlier this week, a local court also partially granted the company's injunction against the strike. The court ordered the union to maintain normal operations at certain key production facilities during industrial action.
Prime Minister Kim Min-seok has said that a strike could wreak havoc on the economy, noting that Samsung accounts for about 23% of South Korea's total exports and 26% of the local stock market. The technology titan also employs more than 120,000 people and works with 1,700 contract suppliers, he said.
Kim noted that suspended operations at Samsung's chip assembly lines could cause economic losses of up to 1 trillion won, equivalent to $663.1 million, every day. Economic damage from the labor unrest could also balloon to as much as 100 trillion won if wafers have to be discarded because of a strike.
An 18-day strike could reduce Samsung's operating profit by roughly 5% this year, Morningstar analyst Jing Jie Yu said in a research note. He also warned that less-competitive compensation could prompt talent outflows, especially in its memory division. He said that a talent drain in 2019 caused Samsung to fall behind in developing certain high-bandwidth memory products and miss out on strong demand in 2024 and 2025.
Samsung's shares are likely to have largely priced in concerns about a strike, KB Securities analysts said in a note. They added that an easing of the uncertainty surrounding the labor dispute could lift shares. Samsung's operating profit is expected to surge 19-fold from a year earlier to around 90 trillion won in the second quarter, fueled by stronger-than-expected memory-chip prices and brisk demand from big tech companies, the analysts, led by Jeff Kim, said.
Samsung's shares closed 0.2% higher Wednesday, after falling over 4% earlier in the session.
Write to Kwanwoo Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
05-20-26 1223ET
