Samsung's largest strike in current history may affect the normal operation of the global chip supply chain
2024-07-09
South Korean technology giant Samsung Group welcomes its largest strike in half a century since its establishment. On Monday local time, thousands of workers from Samsung Electronics walked out of the assembly line and carried out a three-day large-scale strike in the rain. This unprecedented large-scale strike may damage Samsung's reputation, trigger similar activities throughout the technology industry, and also affect the normal operation of the entire chip supply chain. After negotiations over a salary increase broke down last month, one of Samsung's largest unions, the National Samsung Electronics Union (NSEU), has been preparing for a strike in the past few weeks. The union stated that 6540 union members from Qixing, Pingze, Tianan, Wenyang, Guiwei, and Guangzhou factories participated in the strike, with 5211 people participating in semiconductor equipment, manufacturing, and research and development (process) positions alone, which will inevitably affect production work. The Samsung National Electronics Union has over 28000 workers, accounting for approximately 20% of the total number of Samsung Electronics employees. Their demands to Samsung include hoping for a higher salary increase and an adjustment to the performance bonus system. The leader of Samsung's National Electronics Union said that the strike action aims to convey a message by disrupting the production of the company's chip factory: "If you don't get a raise, you won't go to work.". According to reports, there are two main points of dispute between the two sides. Firstly, the salary increase is too low: the union believes that the 5.1% increase proposed by the company is too low and demands that the salary increase be increased to 6.5%. Secondly, there is the performance bonus system: the labor union requires Samsung Electronics to adjust the measurement standard of performance bonuses, from calculating based on economic added value (after tax net operating profit minus capital investment) to calculating based on operating profit, which is the same as SK Hynix, LG Electronics and other companies. A spokesperson for NSEU stated that in the past 10 years, the company has been saying that they are facing a crisis, but the company should not use this as an excuse to not meet the demands of workers. For many years, Samsung has rarely experienced labor disputes. Samsung founder Li Bingzhe, who passed away in 1987, once said that "unless my eyes are covered by dirt, I will never allow unions to exist.". An employee once exposed Samsung's internal documents, which stated, "In order to avoid accusations of labor issues, the main organizers should be dismissed before the union is established.". It was not until 2019 that Moon Jae-in, a human rights lawyer who once represented the trade union, became the President of South Korea, and then Lee Zaiyong, the grandson of Samsung's then vice chairman and founder, was put on trial. Only then did some Samsung employees find the opportunity to establish the trade union. After the establishment of the five unions at Samsung Electronics, employees were able to successfully receive salary increases almost every year. In early June this year, Samsung Electronics experienced its first strike in 55 years, which was an escalation of the strike activity in early June. The union representative said, "The purpose of the strike is to interrupt production." Samsung, which is on the decline, is in South Korea. Samsung Electronics is a "super large factory" that workers are eager to enter because its wages have long been at the highest level in the industry. According to the career information website INDEED, the average annual salary for all employees and executives of Samsung located in South Korea is 144 million Korean won (approximately 751000 RMB), and even the lowest level factory machine operators earn $4800 (approximately 34800 RMB) per month. But in recent years, the labor management contradiction has been expanding day by day. "Samsung's semiconductor business is closely related to the current global market demand and inventory. Especially in the context of a sluggish external environment, there have been significant changes in the company's internal management, and the company's management has neglected employee benefits, leading to employee dissatisfaction." said Li Tianguo, Executive Director and Associate Researcher of the Emerging Economy Research Office at the Asia Pacific and Global Strategy Research Institute of the Chinese Academy of Social Sciences. For Samsung, this is a critical moment for the development of its chip business, and it cannot afford any internal turmoil or production chaos. On May 21st, Samsung replaced the head of Digital Solutions (DS) in its semiconductor division. According to the South Korean "Korean National Daily", this personnel adjustment means that senior executives of Samsung Electronics may believe that its semiconductor business is in trouble. According to the 2023 Global Semiconductor Manufacturer Revenue Ranking released by market research firm Gartner, Samsung's semiconductor revenue plummeted by 37.5% to $39.9 billion in 2023, dragged down by its storage chip business, surpassing Intel and retreating to second place. In terms of products, Samsung is already in a backward position in the field of high bandwidth memory (HBM) that is essential for training artificial intelligence (AI). Samsung's competitor, SK Hynix, also a South Korean semiconductor giant, began providing Nvidia with its fifth generation HBM products in March this year. However, products produced by Samsung Electronics have yet to pass Nvidia's standard tests due to heating and power consumption issues. In addition to the hottest HBM product line, Samsung is also declining in other semiconductor businesses. According to market research firm Counterpoint Research, based on revenue in the first quarter of this year, Samsung's market share in semiconductor foundry business has declined from 15.5% in the fourth quarter of last year to 13%. In terms of revenue, although Samsung turned losses into profits in the first quarter of this year, with a revenue of 6.606 trillion won, its net profit was only 1.91 trillion won. SK Hynix's revenue reached KRW 12.43 trillion, almost twice that of Samsung, and its net profit reached KRW 2.89 trillion. Even so, even if Samsung Electronics makes a slight move, it could potentially cause a storm in the storage chip market. Billy Leung, investment strategist at Future Asset Finance Group, said, "The timing of this strike is particularly crucial as it coincides with challenges facing the global semiconductor supply chain." Billy Leung believes that "any interruption in Samsung's business could have a chain reaction." Samsung Electronics' South Korean factory experienced a power outage in March 2018. At that time, a power outage of only 28 minutes resulted in a 3.5% decrease in global flash memory production, causing Samsung Electronics to lose over 36 million US dollars. In 2019, another factory of Samsung Electronics experienced a one minute power outage, which took three days to resume production. In 2021, due to a power grid failure, Samsung Electronics shut down its factory in Austin, Texas for a month, resulting in a loss of nearly $290 million. Due to the difficulty in restarting production, the shortage of chips was also exacerbated at that time. However, market research firm Trendforce has stated that Samsung's strike will not affect DRAM and NAND Flash production, nor cause a shortage of shipments. The institution stated that the spot prices of DRAM and NAND Flash had already started to decline before the strike was announced, and the decline has not changed since the strike was announced. According to Bu Rixin, Executive Director of Chuangdao Investment Consulting, based on current market reactions, the market prices of DRAM and NAND Flash have not fluctuated much since the union announced the strike. It seems that the market has not yet responded to this incident. However, based on previous production shutdowns, it is highly likely that this strike will cause significant losses to Samsung Electronics. For the global storage chip market, Bu Rixin believes that the final price increase or not will depend on the duration of this strike. In the short term, Samsung Electronics and major storage chip manufacturers can still meet market demand through their existing inventory, and their response to prices will not be so rapid. But if negotiations between the union and management cannot proceed and the strike lasts longer, DRAM and NAND Flash chips will definitely experience price increases. (Lai Xin She)
Edit：Xiong Dafei Responsible editor：Li Xiang
Source：China.org.cn
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