Samsung Faces First Strike in Its History

For the first time, workers at Samsung Group, the conglomerate that dominates the South Korean economy, were set to strike on Friday.

The action comes as Samsung fights to regain its edge in the business of making memory chips, a critical component in the advanced artificial intelligence systems that are reshaping longstanding rivalries among global technology companies.

Workers in Samsung’s chip division were expected to make up the majority of those who will not report to work on Friday for a planned one-day strike. Union representatives said that multiple rounds of negotiations over wage increases and bonuses had broken down.

“The company doesn’t value the union as a negotiating partner,” said Lee Hyun Kuk, the vice president of the Nationwide Samsung Electronics Union, the largest among five labor groups at the company. It says it represents 28,000 members, about one-fifth of Samsung’s global work force, and that nearly 75 percent voted in favor of a strike in April.

Mr. Lee said that union workers received no bonuses last year, while some had gotten bonuses of as much as 30 percent of their salaries in the past. “It feels like we’ve taken a 30 percent pay cut,” he said. The average union worker earned about 80 million won last year, or around $60,000 before incentives, he said.

A Samsung representative said the company was trying to reach an agreement with the union but declined to comment further on the strike.

The work stoppage was not expected to affect Samsung’s manufacturing output. It was timed to fall between a national holiday and the weekend, on a day that many workers in South Korea planned to take as vacation. Still, it was awkward timing for the company, which has been trying to reassure clients and investors that its chip business can meet the demands of the artificial intelligence boom.

“Samsung has been a highly respected company in the memory semiconductor sector, they’ve been the leader for decades. But they lost the technology leadership to competitors,” said Nam Hyung Kim, an analyst at the equity research firm Arete Research. “The union strike is nothing compared to a lot of the issues they are facing at this point,” Mr. Kim said.

While so-called logic chips make computers run, memory chips let them store information. They are in everything from smartphones to refrigerators. Advanced computers use many of both types of chips, and generative artificial intelligence systems rely on extra-strength, high-bandwidth memory chips to create text, images and other kinds of content on demand.

Samsung has been the world’s largest maker of memory chips for years, and reported about $1.4 billion in profit from its chip division in the first quarter of this year.

But that comes after four straight quarters of losses. Samsung ended last year with its weakest earnings in more than a decade.

Despite the losses, Samsung remained the world’s biggest memory chip maker by revenue and market share last year, according to TrendForce, a market research firm. But heading into the year, its local rival, SK Hynix, claimed the top spot in the market for the next generation, high-bandwidth memory chips just as demand for them took off. Companies developing artificial intelligence systems like Nvidia scrambled to buy them. Analysts say that SK Hynix anticipated this demand earlier than Samsung did. Samsung’s foundry business, which makes chips designed by other companies, also lags behind rivals.

The result was the largest shortfall in the company’s history, according to remarks Jun Young-hyun made to his colleagues when he took over the leadership of Samsung’s chip division last month after an executive shake-up.

Mr. Jun had previously led Samsung’s chip business when it overtook Intel Corporation as the world’s largest chip maker by revenue. And he ran its battery arm after the company discontinued a line of smartphones after several had spontaneously exploded.

A representative from Samsung said the company expects to increase its output of high-bandwidth memory products threefold over last year, and to double that again in 2025. The company said it plans to invest about $200 billion by 2042 in a new semiconductor industrial complex south of Seoul that is being developed by the government, and that it plans to spend $40 billion on facilities in Texas.

Samsung’s chairman, Lee Jae-yong, was acquitted in February of charges relating to a merger.Credit…Yonhap/EPA, via Shutterstock

This time, Mr. Jun’s quest for a comeback comes as Samsung tries to move on from years of uncertainty while its top executive, Lee Jae-yong, was ensnared in a corruption scandal that led to the impeachment of former President Park Geun-hye.

Mr. Lee, South Korea’s wealthiest person, according to Bloomberg News, is a scion of the family that founded Samsung, the largest of the family-run conglomerates known as chaebol that have transformed South Korea into an export superpower and influence nearly every facet of society.

In February, he was acquitted of additional charges relating to a merger that helped him secure control over the company. Mr. Lee’s legal trouble has kept Samsung’s influence over South Korea’s economy and politics in the spotlight.

For decades, Samsung was known for its aversion to organized labor, and unions have organized workers at the company only in the last several years. Mr. Lee said that some employees had expressed fear about joining the union.

“Our goal on Friday isn’t to affect the production line, but rather to send a message to the management that we have reached a certain level of maturation,” Mr. Lee said.

After the vote in April, the union held multiple rallies. In a bid to appeal to the public for support, it planned the events to feel like a street festival and arranged for K-pop singers to entertain the crowd.

Since last week, when the union announced the strike day, a bus draped with a banner bearing the union’s protest slogan — “Labor oppression, union oppression, we won’t take it anymore!” — has been parked in front of Samsung’s offices near Seoul’s fashionable Gangnam district.

Workers have agreed to collectively take the day off and then return to work but are prepared to take additional days in the future if they cannot come to an agreement with the company, Mr. Lee said.

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