The labour unions are mounting increasing pressure on Samsung Electronics as the wage resentments are also increasing in South Korea. The company has since resorted to court in a move to curb what it is terming as illegal strike related practices to further complicate an already challenging process of negotiation.
The conflict is occurring when Samsung is doing well financially and more so in its semiconductor segment. The increasing demand of artificial intelligence technology across the world has increased the prices of memory chips and this has assisted Samsung to post a significant growth in its profits. Nonetheless, most employees feel that the company ought to enhance employee salaries and bonuses as well since the company is in better financial health.
On Thursday, Samsung affirmed that it had requested a court in South Korea to restrain some union activities, which it thinks might extend past the legal strike action. The company says it is not attempting to prevent workers to exercise their right to protest or walk out as a legal right. Instead, Samsung claims that it does not want to see moves that will significantly disrupt factory activities, like taking over production lines or disrupting the manufacturing process.
The union leaders have been angered by the move of the company, which they view as a violent act in the midst of ongoing wage negotiations. One of the unions explained that the move by Samsung was a declaration of war, and that the company was attempting to undermine the rights of employees. Labour unions claim that the freedom to strike is guaranteed by the South Korean legislation and that no company must want to curtail peaceful industrial action.
The argument has been cumulating over a number of weeks. In the previous month, Samsung employees who were union members voted in support of the plan to authorize strikes. They threatened the management that unless they agree on wages an 18 days long strike would start on May 21. The unions also declared they would hold a mass rally on April 23, which would put more pressure on the company and raise more awareness of the issue to the population.
To most Samsung employees, it is not the amount of wages that they are frustrated with but the way their wages compare with those of employees at competing chip manufacturer SK Hynix. Two of the largest semiconductor corporations in the world are Samsung and SK Hynix, both of which significantly contribute to the provision of memory chips in smartphones, computers, servers and artificial intelligence systems.
The employees feel that they are not making any progress in their compensation especially in comparison to the good financial incentives enjoyed by Samsung employees in SK Hynix. This has been a sensitive concern since the semiconductor industry is a very competitive industry and skilled employees are very demanded.
The current bonus structure of Samsung is one of the largest grievances of unions. Employees are urging the firm to abolish its performance pay ceiling, which restricts the amount of money workers can get even in years of good performance. They also desire bonuses to be pegged on operating profit and this implies that employees would automatically enjoy bigger payoffs when Samsung is doing well financially.
On the side of the workers, the timing makes their requests seem right. Recently Samsung estimated that it has generated an operating profit of 57.2 trillion won in January to March. That amount is over eight times higher than the 6.69 trillion won it had registered at the same time last year.
A significant portion of this increase in profits has been through the artificial intelligence boom in the world. The firms worldwide are also spending a lot on AI systems, cloud computing and large data centres, which demand massive quantities of advanced memory chips. This has led to increased prices of chips by a large margin and this has offered great opportunities to companies such as Samsung.
Although these profits might be construed by investors to be an indicator of an effective strategy by Samsung, employees are questioning why the employees are not enjoying a greater percentage of the gains. It is thought that some of the individuals that are employed within the factories, research laboratories and manufacturing plants are the keys to the recent success of the company.
The labour conflict has not only caused concern in South Korea, but also worldwide in the technology sector. Samsung is the global leader in the manufacturing of memory chips and its failure to produce them normally would have the ripple effect to the global supply chains.
One of the biggest chip production plants in the world is the semiconductor complex of the company in Pyeongtaek, which is located south of Seoul. The union leader of Samsung claimed that a strike would hit about 50 percent of the production at the plant. That is a huge number considering Samsung is used by many technology firms in manufacturing their products such as smartphones and laptops to artificial intelligence servers.
In case production decreases or halts, it would results in shortages in the semiconductor market when the demand is already very high. The global industries have reported recurrent supply chain issues in the past several years that are associated with chip shortages. Semiconductor supply delays have impacted automakers, consumer electronics companies and data centre operators.
A large scale strike at Samsung would reintroduce some of the same issues. Firms that rely on Samsung as their memory chip supplier would have to seek other suppliers, yet not many of the large players in the market are able to manufacture the chips on the same scale.
Meanwhile, Samsung is going through a challenging balancing act. On the one hand, it is interested in safeguarding its production and ensuring stability at its factories. On the other hand, it will put its relationships with workers at risk by being perceived as being too aggressive or unwilling to concessive.
Big firms usually encounter this difficulty when in boom times. Employees tend to demand higher salaries, more benefits and a higher appreciation of their input when profits are increasing rapidly. When these expectations are not fulfilled then labour tensions may escalate.
