Potential Samsung strike threatens global chip supply, company status

A potential Samsung labor union strike threatens massive production losses, estimated at USD 677 million per day. Experts warn this could erode trust in the chip supply chain and push clients like Nvidia and AMD toward competitors like TSMC.

A potential Samsung labor union strike in Korea could shake trust in the chip supply chain and compromise the company's standing as a reliable global provider. According to a report by The Korea Herald, Samsung Electronics is faced with the prospect of significant production setbacks if its labor union proceeds with a planned strike scheduled for next month.

Financial Ramifications and Supply Chain Risks

According to the report, Song Heon-jae, a professor of economics at the University of Seoul, spoke at a recent seminar hosted by the Ahnmin Policy Forum regarding the financial implications of such a move. He noted that a shutdown of chip plants cost Samsung tens of billions of won per minute. This translates to approximately 1 trillion won, or USD 677 million per day. A prolonged strike threatened to shave as much as 10 trillion won from chip operating profits. Immediate production loss was secondary to the long-term risk of losing the company's status as a stable supplier.

"Global big tech clients could begin looking at alternative suppliers such as TSMC as part of efforts to spread risk," the report quoted Song. "In the semiconductor industry, where process verification takes enormous time and money, customers who leave are difficult to win back."

Recent activity from Samsung's joint labor action committee already showed signs of operational strain. As per the report, the committee, which included the Samsung Electronics Labor Union and the National Samsung Electronics Union, reported disruptions at the Pyeongtaek chip complex during a night shift rally, with 40,000 union members attending the event. Between 10 p.m. and 6 a.m., production performance fell 18.4 per cent at memory fabs and 58.1 per cent at foundry fabs.

The report noted that Song emphasized that major clients like Advanced Micro Devices and Nvidia placed a high priority on supply stability. He suggested that even a limited disruption acted as a blow to Samsung's credibility. The damage included the erosion of customer trust, market share losses, and missed opportunities in the artificial intelligence chip race.

"Semiconductor technology can lose competitiveness after falling behind by just one or two years," the report quoted Song. "At a time when Nvidia, TSMC and Intel are fighting for leadership in AI chips, Samsung cannot afford to spend resources on internal disputes."

Union Demands and Planned Action

The labor unions demanded an end to the cap on performance-based bonuses and a more transparent calculation system. They sought to remove the rule that limited performance pay to 50 per cent of annual salary and asked for 15 per cent of operating profit to be allocated to the bonus pool.

"The walkout is expected to begin with a gathering near Samsung Electronics Chairman Lee Jae-yong's residence in Yongsan-gu, Seoul. The Samsung Electronics Labor Union filed a rally notice with Yongsan Police Station on Friday for an event near Lee's home at around 1 p.m. on May 21, the first day of the planned strike," the report mentioned.

Historical Context

If carried out, it would mark Samsung Electronics' second general strike since its founding in 1969, following a 25-day walkout in July 2024, according to the report. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)