Samsung's Strike Averted, But Concerns Linger Over Fixed Profit-Sharing Impact on Competitiveness

Samsung Electronics and SK Hynix have averted a strike crisis by reaching a tentative agreement on their 2026 wage negotiations. However, significant concerns are being raised about the impact of the 'N% of operating profit' fixed performance bonus system on South Korea's semiconductor competitiveness.

This is particularly worrying as major competitors are focusing on securing cash for facility investments. While Samsung Electronics and SK Hynix face fixed annual bonus burdens of tens of trillions of won, their rivals are actively expanding their investment.

Micron, which is chasing Samsung and SK in the memory sector, has increased its facility investment scale for this year from $20 billion to $25 billion (approximately 38 trillion won). The company is embarking on new fab construction, primarily in the United States and Singapore, including a megafab in Clay, New York, with an initial investment of up to $100 billion (approximately 152 trillion won) over the next 20 years.

TSMC, the leader in the foundry market, has raised its facility investment scale for this year to as much as $56 billion (approximately 85 trillion won). This figure represents more than half of its cumulative facility investment over the past three years ($100 billion). TSMC is expanding its production bases not only in its home base of Taiwan but also into the United States and Europe.

SK Hynix paid approximately 4.7 trillion won in performance bonuses to its employees early this year. Considering an estimated operating profit of around 250 trillion won for this year, it is projected to distribute about 25 trillion won to employees early next year. Projections for operating profit in 2027 even mention 400 trillion won.

In such a scenario, SK Hynix would pay a total of 65 trillion won in bonuses over two years. Considering that building one semiconductor fab costs about 20 trillion won, this amount is sufficient to construct more than three semiconductor fabs.

Industry experts emphasize the importance of securing flexibility in capital management, given the cyclical nature of the semiconductor industry, which alternates between booms and busts.

A semiconductor industry official stated, "In the semiconductor industry, where long-term, large-scale investments are essential, failure to secure sufficient capital during boom periods makes it impossible to survive the downturns, which can turn into a kind of chicken game." He added, "For K-semiconductors to maintain their technological lead over competitors, securing mid- to long-term competitiveness is essential."

This issue also leaves behind the question of whether the agreement to pay large performance bonuses violates the fiduciary duty to shareholders.

The shareholder group 'Korea Shareholder Movement Headquarters' has demanded an extraordinary general meeting, asserting that Samsung Electronics' decision on special performance bonuses is the prerogative of shareholders. They argue that, according to Supreme Court precedents, this type of performance-based compensation is not a 'wage or other working condition' that labor and management can agree upon.

They emphasized, "It is sufficient for the union and management to persuade each shareholder and obtain approval for profit distribution through a shareholder meeting resolution without violating the Commercial Act." They also stated that they would proceed with a lawsuit for invalidity if a shareholder meeting is not convened.

President Lee Jae-myung also criticized the system during his opening remarks at a Cabinet meeting and emergency economic countermeasures meeting on the 20th, stating, "It is an act that even investors cannot do to institutionally share a certain percentage of operating profit before deducting taxes, which can be considered the common share of the people."

There are also strong calls for greater transparency and diversification in the performance bonus calculation standards for domestic companies.

In the past, Samsung Electronics and SK Hynix used Economic Value Added (EVA) as the basis for performance bonuses.

However, the company has not clearly disclosed the calculation methods and factors, leading to ongoing controversy over a 'black box' system. Employees have consistently raised claims that the company can arbitrarily adjust variables, as Samsung Electronics, for example, considers factors like competitors' Return on Equity (ROE) along with EVA, reflecting market conditions and competitor performance, but lacks clear criteria for these considerations.

This suspicion is analyzed to have led to employee demands for a simple and intuitive operating profit as the performance bonus criterion.

The Korea Corporate Governance Forum recently commented, "A simple performance evaluation and compensation system that all stakeholders, including management, the board of directors, employees, and shareholders, can understand and measure is needed."

According to the Forum, Apple's executive evaluation and compensation are centered around metrics such as ▲ relative total shareholder return ▲ revenue growth rate ▲ operating profit growth rate. Nvidia also uses indicators like ▲ 3-year relative total shareholder return ▲ revenue growth rate ▲ operating profit growth rate.