Samsung reaches 11th-hour deal with union to avoid a potentially crippling strike

[SEOUL] In a last-minute reversal, Samsung Electronics reached a tentative deal with its labour union, averting a potentially crippling strike that had been scheduled to start on Thursday (May 21) at the world’s largest memory chipmaker.

The South Korean company said in a statement late on 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 Jun 7.

The news follows days of back-and-forth brinkmanship and high-pressure negotiations. On Wednesday morning, labour leader Choi Seung-ho said the work stoppage would go ahead on Thursday after Samsung’s management rejected a proposal from government mediators that the union had accepted.

South 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 tentative 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 (S$170.4 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 nine am on May 23 to 10 am on May 28.

Global supplier

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 centre 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 strains between management and labour showcased simmering tensions across the country as workers push for a greater share of the profits that companies like Samsung and SK Hynix are deriving from a global AI infrastructure boom.

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The union had earlier demanded that Samsung scrap an existing bonus cap, allocate 15 per cent of its operating profit to worker bonuses and formalize those terms in employment contracts. Labour leaders pointed to SK Hynix, which last year agreed to allocate 10 per cent of annual operating profit to a performance bonus pool.

Samsung had proposed allocating 10 per cent 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 system, Samsung will keep its existing profit-sharing bonuses and add a new scheme for the chip division funded by 10.5 per cent of performance, according to a statement from the union. The bonus pool will be split between different levels of the organisation, with 40 per cent allocated to the division and 60 per cent 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 per cent this year, along with improved child support payments and housing loans.

The agreement, however tentative, will likely come as a relief to customers and other business interests.

“There are mounting concerns that any significant production disruptions or operational uncertainty at Samsung Electronics could place additional strain on the global memory semiconductor market, potentially worsening supply bottlenecks, price volatility, procurement uncertainty and broader supply chain instability,” the American Chamber of Commerce in Korea said in a statement this month. BLOOMBERG