What’s inside Samsung’s standoff with the Union in South Korea?

Strike at Samsung: Samsung Electronics, the world's largest maker of memory chips, smartphones, and televisions, is currently facing an indefinite strike called by the National Samsung Electronics Union (NSEU) at Hwaseong in South Korea.

This move comes after a three-day general strike aimed at pushing for better pay and benefits. In the previous month, the union organised Samsung's inaugural walkout, with approximately 3,000 workers participating in a protest on Monday.

“The company has no intention to engage in a dialogue even after the first general strike, thus we declare a second general strike starting from July 10th, lasting indefinitely,” the union said in a statement.

What triggered the strike?

The NSEU, representing approximately 30,000 Samsung employees—nearly a quarter of the company’s workforce in South Korea—has been in a standoff with Samsung's management over pay and benefits. The union demands a 3.5 per cent increase in base salary and an additional day off to mark the union's founding. Although management offered a 3 per cent raise, the union insists on the extra 0.5 per cent to account for inflation.

What is the union’s stance?

The union announced the indefinite strike after claiming that Samsung's management showed no intention of engaging in negotiations. Lee Hyun-kuk, vice president of the NSEU, stated that the union decided to extend the industrial action after the company failed to respond to their demands during the initial three-day strike. The union asserts that about 6,500 workers have participated in the strike so far, disrupting production lines and slowing down some equipment.

How has Samsung responded?

Samsung has denied any disruptions to its production lines and reiterated its commitment to good faith negotiations. Reportedly, in a statement the company assured that it would ensure no production interruptions occur. Despite the union's claims, Samsung has maintained that its operations continue smoothly.

What is the broader impact?

This strike is notable as it represents the first significant labour action at Samsung Electronics since the company's foundation over five decades ago. It reflects a growing trend of union activity among major tech companies globally, driven by disputes over working conditions and compensation.

Why is this significant for the tech industry?

Samsung Electronics is a critical player in the tech industry, holding substantial market shares in memory chips and smartphones. Any prolonged disruption in its production could have significant implications for the global supply chain, especially amid an AI boom that has driven up demand for advanced chips. The strike could also affect Samsung's efforts to secure its position as a preferred supplier for tech giants like Nvidia.

Financial performance amid strike

Despite the ongoing strike, Samsung Electronics has projected a significant increase in its profits for the second quarter of 2024. The company expects profits to rise 15-fold compared to the same period last year, driven by the booming demand for AI chips. This surge has pushed the prices of advanced chips higher, contributing to Samsung's optimistic forecast.

The company anticipates its profit to reach 10.4 trillion won ($7.54 billion) for the three months to June 2024, up from 670 billion won the previous year. This projection surpasses analysts' forecasts of 8.8 trillion won, according to LSEG SmartEstimate. The announcement led to a more than 2 per cent rise in Samsung shares during early trading hours in Seoul. The AI boom, which has significantly boosted companies like Nvidia, is also contributing to Samsung's financial success