Samsung Electronics shares surged nearly 8% in morning trade on Thursday after the company clinched an 11th-hour deal with its South Korean union to avert a planned strike. The 18-day strike by approximately 48,000 union members has been suspended, with the agreement put to a vote between May 22 and May 27. According to Reuters, the deal sparked relief across South Korea as Samsung accounts for about a quarter of the country's exports. The planned strike was expected to inflict significant damage to the economy and dent global chip supply if it had proceeded. Ryu Young-ho, a senior analyst at NH Investment & Securities, noted that while investors were relieved that the strike appeared to have been averted, the agreement had resulted in substantially higher labour costs.
The agreement includes significant changes to Samsung's bonus distribution system, with the company accepting the union's demands to abolish the 50% cap on bonuses and link bonuses to operating profits. As reported by Reuters, Samsung is expected to set aside about 10.5% of agreed business performance for special bonuses for the chip division, with targets for the chip division to achieve more than 200 trillion won ($135 billion) in annual operating profit from 2026 to 2028 and 100 trillion won from 2029 to 2035. A memory chip worker with a base salary of 80 million won is expected to receive a bonus of around 626 million won ($416,000) this year, mostly paid in stock. The union's demand that 15% of operating profit be allocated towards bonuses was also pared back in the final agreement.
The breakthrough followed post-mediation talks at the National Labor Relations Commission and additional government efforts to prevent negotiations from collapsing. Labor Minister Kim Young-hoon welcomed the tentative agreement, saying he was "truly grateful" that management and labor had reached a deal through negotiations. The company thanked the government, employees and other stakeholders for helping conclude the negotiations, apologized for causing concern, and pledged to build a "more mature and constructive labor-management relationship." The decision eased immediate fears of disruptions to Samsung's chip production, as any prolonged strike at Samsung is closely watched across the semiconductor industry. However, the risk of labor action has not disappeared - if union members reject the tentative deal, strike plans could quickly return to the table.
The agreement will be put to a vote by union members, with Union leader Choi Seung-ho announcing that the vote will take place from 9 a.m. Saturday through 10 p.m. May 28. The suspension comes after days of negotiations that broke down multiple times, including earlier on Wednesday when the union announced it would proceed with the strike before talks restarted. Union leader Choi Seung-ho has said he expects the agreement to be ratified, providing additional confidence in the deal's permanence. Samsung, which accounts for almost a quarter of South Korea's exports and is the world's largest memory chip maker, had faced potential disruptions that could have fueled price rises during the AI boom. The plan to pay performance bonuses in stock rather than cash could lower the immediate financial burden on the company, according to analysts.
