Samsung shares rise 6.7% after labor talks ease chip output fears

Samsung Electronics Co. shares registered 6.7% gains following the start of wage negotiations. Company executives just resumed talks with its largest labor union in an effort to prevent an operational shutdown. News of the negotiations has helped lessen anxieties at least for the moment, triggering the shares’ uptick.

Facing a critical deadline, these talks intend to finally resolve the high-stakes friction over employee bonuses. Earlier, the union had signaled an 18-day strike beginning Thursday, with more than 46,000 members showing intent to participate. 

What are the labor union demands for Samsung?

Samsung and its workers are still deadlocked on performance bonuses linked to AI hardware profits amid the historic surge in memory demand. The union has been requesting performance-based payouts totaling 15% of Samsung’s operating income, the abolition of bonus limits, and a formalized compensation plan.

According to Yonhap, the company suggested allocating 10% of operating profits to employee bonuses, along with a one-time special compensation package.  

Around the same time, the company’s Chairman Lee Jae-yong of Samsung Electronics also apologized publicly for the unease over domestic company matters and made a strong plea for internal cohesion.

Union boss Choi Seung-ho, however, explained that workers turned to the union only after losing faith in the company, emphasizing that the next round of negotiations must restore that trust. 

Any shutdown in Samsung’s operations could send shockwaves through the global tech supply chain, considering the company is a key supplier of semiconductors for servers, phones, and EVs.

Nonetheless, the renewed talks have eased some of those fears. For this round of talks, Samsung accommodated a union request by replacing chief negotiator Vice President Kim Hyung-ro with Yeo Myung-koo, the leader of the Device Solutions division’s People Team.

An injunction has also reduced investor fears of a standown. A Korean court on Monday approved a restraining order against prospective unlawful actions by the union.

Shares of Samsung Electronics have thus surged as much as 6.7% on Monday. 

South Korean President Lee Jae-myung calls for the respect of labor rights

South Korean President Lee Jae-myung also weighed in on the potential worker strike, calling for mutual respect between labor unions and company leadership. 

On X, the president noted, “Labor must be respected as much as business, and corporate management rights must be respected as much as labor rights.”

He contended that employees should be paid fairly for their services, and that investors who take on financial risks should receive a share of the profits. “Excess is not beneficial; extremes inevitably lead to reversal. It is not that the strong possess more and thus become happier; a world where we unite, take responsibility, and all live well together is the future of a new Republic of Korea,” he added.

On Sunday, Prime Minister Kim Min-seok had also issued an appeal, encouraging both stakeholders to resolve the impasse through bilateral communication.

However, he emphasized that the government would evaluate all potential remedies, including “emergency adjustments,” if the strike risks causing serious disruption. South Korean law allows the labor minister to mandate an “emergency adjustment” suspending labor strikes for 30 days if they jeopardize public life or the economy.

Kim warned that the strike could result in unimaginable economic losses. He estimated that the strike could cause direct losses of up to 1 trillion won, or about $664.7 million. He further cautioned that cumulative fiscal liabilities could reach 100 trillion won, about $66 billion, if operational downtime necessitates the disposal of work-in-progress semiconductor wafers.

Despite ongoing tensions, unions have agreed to continue discussions, while maintaining the option of industrial action if a deal is not reached. Samsung has not yet commented in detail on the latest talks.

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