By Hyunjoo Jin and Heekyong Yang
SEJONG, South Korea, May 19 (Reuters) – Samsung Electronics and its South Korean union have narrowed some differences, a mediator in their talks said on Tuesday, as pressure mounts from the government and business groups to avert an imminent and damaging lengthy strike.
The two sides are seeking to hash out a deal on bonus payments before nearly 48,000 workers walk off the job for 18 days on Thursday.
A strike of that magnitude and length has the potential to inflict significant damage on the economy as Samsung accounts for almost a quarter of South Korea’s exports. Samsung is also the world’s largest memory chip maker and production disruptions could dent global supply at a time when the boom in artificial intelligence has caused shortages.
Park Su-keun, chairman of the National Labor Relations Commission, which is mediating the talks, said that while both sides had made concessions, they remain stuck on two key issues but declined to elaborate.
Samsung declined to comment, while a union representative was not immediately available for comment.
UNION UNDER MUCH PRESSURE NOT TO STRIKE
While the threat of the strike has put South Korea on edge, investors have been heartened after the government threatened over the weekend to step in and order emergency arbitration. That would prevent the strike from going ahead for 30 days while the government mediates talks.
Shares in Samsung were down 0.7% on Tuesday, paring losses after the news that both sides were narrowing differences. They are also up 0.4% for the past week.
Industry minister Kim Jung-kwan told parliament on Tuesday that the strike “must not happen.”
“The reality is that all of our citizens are worried about this, considering the ripple effects that a Samsung strike could bring,” he said.
South Korean business groups have also urged the union not to proceed with the strike.
THE POTENTIAL ECONOMIC FALLOUT
The strike could in a worst-case scenario shave 0.5 percentage points off a forecast 2.0% expansion for the South Korean economy this year, according to an official from the country’s central bank, who declined to be named.
This assumes that around 30 trillion won ($19.9 billion) of chip production could be lost and an additional “few weeks” of disruption before production lines are operating normally again.
KB analyst Jeff Kim has estimated that an 18-day strike could disrupt global supplies of DRAM memory by 3% to 4% and NAND memory by 2% to 3%, which would likely fuel further price increases.
SAMSUNG’S WIDENING PAY GAP WITH HYNIX
The dispute is the biggest clash between Samsung and its labour union since Samsung Electronics Chairman Jay Y. Lee pledged in 2020 to put the firm’s past union-busting activities behind it.
Samsung is one of the most sought-after workplaces in Korea, but employees have been increasingly frustrated by a widening pay gap with smaller rival SK Hynix which took an early lead in supplying high-bandwidth memory for artificial intelligence chip units to Nvidia.
SK Hynix overhauled its pay structure last year, resulting in bonuses more than three times higher than those offered to Samsung workers. Samsung union members said this has accelerated an exodus of workers to SK Hynix and sparked a surge in Samsung union membership.
The union has demanded Samsung abolish a bonus cap of 50% on annual salaries, allocate 15% of annual operating profit to a bonus pool shared by workers and formalise this in contracts.
Samsung has proposed that memory chip workers receive “special” bonuses that would top those of SK Hynix employees, while maintaining the bonus cap.
A court on Monday partially granted Samsung’s request for an injunction, ruling that essential staffing levels at some production facilities must be maintained during any industrial action.
($1 = 1,505.9000 won)
(Reporting by Hyunjoo Jin; Additional reporting by Joyce Lee, Cynthia Kim and Jack Kim; Editing by Muralikumar Anantharaman, Brenda Goh and Edwina Gibbs)
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