Samsung Electronics resolves total strike crisis with labor-management agreement... Labor-labor and shareholder conflicts anticipated ahead

*This content was translated by AI.

The tentative wage agreement between Samsung Electronics' labor and management passed a yes-no vote by union members, ultimately resolving the risk of a total union strike. This comes 167 days after the initial meeting between labor and management on December 11 last year. Accordingly, Samsung Electronics has resolved the risk of a total union strike.

The joint bargaining team of the Samsung Electronics Labor Union announced on the 27th that the vote on the '2026 Tentative Wage Agreement' was approved. The vote was conducted from 10 p.m. on the 22nd until 10 a.m. today among members of the KCTU Samsung Electronics Branch (KCTU) and the National Samsung Electronics Labor Union (NSLU).

However, strong opposition from employees in the semiconductor (DS) and finished products (DX) divisions, along with anticipated collective action by shareholders, is expected to trigger significant fallout.

The tentative labor-management agreement centers on a 6.2% average wage increase, the introduction of a special management performance bonus for the DS division based on business performance at 10.5%, and the launch of a housing loan system.

The funding allocation ratio for the DS special management performance bonus was set at 40% for the division and 60% for business units, with the payment rate for common organizations determined at 70% of the memory business unit's payment rate. For loss-making business units, a 60% rate of the common payment rate will be applied, effective from the 2027 fiscal year.

The DS special management performance bonus will be applied for the next 10 years, with payments made annually when the DS division achieves an operating profit of 200 trillion won from 2026 to 2028, and 100 trillion won annually from 2029 to 2035.

Based on the securities industry's estimate of Samsung Electronics' DS division annual operating profit of 300 trillion won this year, substituting 'business performance' into operating profit yields a special management performance bonus fund of approximately 31.5 trillion won. Of this, 40%, or about 12.6 trillion won, will be distributed equally among approximately 78,000 members across the entire DS division, resulting in approximately 160 million won per person regardless of business unit.

The remaining 60% of the fund allocated by business unit amounts to 18.9 trillion won. The memory business unit is estimated to have about 28,000 members; in addition to the common distribution, each employee will receive an additional approximately 380 million won from the business unit allocation. Including the existing Over-Performance Incentive (OPI), an employee in the memory business unit earning an annual salary of 100 million won can receive a performance bonus of approximately 6 million won.

Employees in the memory business unit earning an annual salary of 100 million won will receive up to approximately 6 million won per person, while employees in loss-making non-memory business units will receive 160 million won per person.

In contrast, employees in the DX division, which produces finished products such as smartphones and home appliances, will receive company shares worth 0.6 billion won, excluding the existing OPI. Given the excessive compensation gap between DS and DX, internal conflicts centered on DX employees are expected to continue for the foreseeable future.

Labor-labor conflict was also evident in the turnout of the tentative agreement vote. Among the 55,333 members who participated in the vote, 44,606 members (80.6%) of the KCTU voted in favor of the tentative agreement, showing overwhelming support.

In contrast, among the 7,283 members of the NSLU, composed mainly of non-semiconductor business unit members, only 1,536 members (21.1%) voted in favor. Analysis suggests that although there was significant dissatisfaction with the agreement favorable to the DS division, the tentative agreement passed due to the overwhelming influence of the KCTU, whose membership is 80% concentrated in the DS division.

DX division union members have already taken action. The Samsung Electronics Labor Union Donghaeng (Donghaeng Union), composed mainly of DX division members, filed an application for a provisional injunction with the Suwon District Court the previous day, seeking to halt the voting procedure for the tentative agreement and prohibit exclusion from voting against the KCTU.

Shareholder opposition is also a challenge. Samsung Electronics shareholder groups have consistently maintained that labor-management negotiations on 'operating profit-linked performance bonuses' that have not been approved by a shareholders' meeting cannot be established as a final labor-management agreement under the current Korean Commercial Act and Labor Union Act, and thus have no legal effect.

These groups have repeatedly warned that they will take legal action against management and the union if the tentative agreement is finalized.

Meanwhile, Noh Tae-mun (CEO)Lee Sa (President), head of Samsung Electronics' DX division, stated on the 27th to DX division employees and staff that "we will take the matter of restoring the DX division's competitiveness and creating a new growth trend more seriously going forward."

Director Noh (CEO) conveyed this through a message to DX division employees and staff on the day, stating, "I believe that many of you have felt a sense of alienation, deprivation, and disappointment and sadness toward the company due to the recent wage negotiation process and its results."

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*This content was translated by AI.