South Korean chipmaker SK Hynix faced a significant labor dispute as union members narrowly rejected a tentative wage agreement on Tuesday. According to the union, of the 15,045 workers who cast ballots, 7,535 members, or 50.08% voted against the agreement, while 7,510, or 49.92% supported it. The agreement, reached after about two months of negotiations, proposed a 6.3% wage increase and changes to the company's profit-sharing bonus scheme. The rejection came five days after SK Hynix and the union reached the tentative agreement, with the outcome decided by just 25 votes. Following the announcement, SK Hynix shares fell 1.5% to 1.646 million won, compared with a 0.2% rise in the broader KOSPI, bringing labor negotiations back into the market spotlight.
The primary source of worker resistance centered on the proposed bonus structure under the new agreement. Under the proposed terms, 40% of the performance-based incentive would be paid in cash and another 60% in SK Hynix shares. Of that stock component, 40% could be sold in the year it was received, while the remaining 20% would be deferred in 10% installments over two years. The stock-heavy structure emerged as the main source of opposition, with union members expressing concern that the value of their compensation could fluctuate with SK Hynix's share price. The bonus structure had emerged as a key sticking point as SK Hynix's profits have surged on strong demand for high-bandwidth memory used in artificial-intelligence applications. The company had previously agreed to allocate 10% of annual operating profit toward performance-based bonuses under a system that would remain in place for 10 years. Based on earlier estimates, the average bonus for SK Hynix employees in 2026 could reach approximately ₹779 million won (around $547,000).
The vote was conducted from 6 a.m. Monday through 9 a.m. Tuesday with a 93.8% turnout among the 16,083 eligible voters. Electronic voting ran from 6 a.m. Monday to 9 a.m. Tuesday, with the technical and clerical workers' union still conducting its own vote as of Tuesday, meaning its outcome remains to be seen. The full-time workers' union covering the Icheon and Cheongju plants participated in the vote, with the company holding a full membership vote rather than the usual delegate vote because the deal amended an arrangement agreed upon last year. Management and the union had reached the tentative agreement on Thursday, replacing a system of full cash bonus payouts with the new structure. As the votes against exceeded half, the tentative agreement failed to pass, and both sides are expected to resume negotiations.
The labor dispute coincided with challenging market conditions for SK Hynix shares. According to Investing.com, SK Hynix shares were down 1.5% Tuesday morning, significantly underperforming the benchmark KOSPI index's 0.2% rise. The company's stock had previously hit a record high in June amid optimism over the AI boom but subsequently declined as investors questioned whether heavy spending on AI-related capacity would generate sufficient returns. The sharp swings have underscored how expectations surrounding the AI memory boom have become increasingly demanding even as SK Hynix continues to report exceptional earnings from booming demand for high-bandwidth memory chips used in artificial intelligence applications. Despite the recent volatility, SK Hynix shares have logged substantial cumulative gains this year, though volatility has increased noticeably after reaching a high in June.
The razor-thin margin has raised expectations that the two sides could reach a revised agreement relatively quickly without the dispute escalating into prolonged labor action. An industry source noted that "considering SK Hynix's position in the Korean economy, both sides are likely to seek a swift settlement rather than allow the dispute to escalate." The narrow vote also increases the chances of reaching an agreement. SK Hynix union members have rejected tentative wage agreements in 2023 and 2024, with both cases resulting in management and the union resuming negotiations and eventually securing approval for revised deals. Currently, SK Hynix and the union are expected to renegotiate the performance-based incentive structure, with the cash-to-stock ratio likely becoming the key focus in the next round of negotiations. It remains unclear how far management will revise the proposal after already adding a cash option for the 2026 payout, though the company faces the ongoing challenge of balancing employee compensation, capacity investments, and shareholder returns against the backdrop of sustained strong demand for AI memory.
