Samsung Electronics shares jumped on Thursday after the company reached a last-minute agreement with its South Korean union, preventing a planned strike. However, the deal, which includes bonuses worth about $416,000 for some employees, also sparked concerns among observers.
The agreement has led to the suspension of an 18-day strike that had been planned by around 48,000 union members. Brokered with government mediation, the deal will be put to a vote from May 22 to May 27, and the union’s leader has expressed confidence that members will approve it.
The deal sparked relief across South Korea. Samsung accounts for about a quarter of the country’s exports and the planned strike was expected to inflict significant damage to the economy and dent global chip supply if it went ahead.
Samsung’s shares and the benchmark KOSPI both rocketed nearly 8% higher in morning trade.
Special Bonuses To Be Mostly Stock
Ryu Young-ho, a senior analyst at NH Investment & Securities, said that while investors were relieved that the strike appeared to have been averted, the agreement was not entirely positive as it had resulted in substantially higher labour costs.
On the upside for Samsung, the plan to pay performance bonuses in stock rather than cash could lower the immediate financial burden on the company, he added.
A union demand that 15% of operating profit be allocated towards bonuses was also pared back.
Under the deal, Samsung is expected to set aside about 10.5% of operating profit for special bonuses for the chip division, which houses its memory and logic chip businesses, according to the union.
A document showed these bonuses would be paid in company stock for at least 10 years and conditional upon the chip division achieving 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, for example, is expected to receive a bonus of around 626 million won or $416,000 this year, mostly paid in stock, a union source said, declining to be identified.
Samsung Electronics’ chip division chief Jun Young-hyun urged staff in a letter seen by Reuters to “leave behind this time of conflict” and unite to strengthen the company’s global competitiveness and long-term growth.
(With inputs from Reuters)
