Samsung faces threat of first-ever strike

In the normally quiet research centre at Samsung Electronics’ head office in Hwaseong, loudspeakers blare as union activists exhort staff to join their campaign for higher wages at the storied Korean company.

The union wants a 6 per cent pay rise while Samsung is offering only 4 per cent — close to the inflation rate. Unless chair Lee Jae-yong comes to the table for negotiations, they will ballot their members on a strike — which would be the first ever at a company that only recognised unions in 2020.

“We are asking the company to treat its workers in accordance with its global standing,” said Son Woo-mok, leader of the 10,000-strong National Samsung Electronics Union.

The threat of strike action comes at a sensitive time for Samsung, which posted a record $3.4bn loss in its chip division in the first quarter. It has been forced to cut chip production amid an industry slump and the US-China technology rivalry. For Samsung, previously known for its aggressive stance to organised labour, this is new territory.

“The company is now at a crossroads, belatedly going through the rocky process,” said Bae Kyu-shik, a labour expert in Seoul. “Given its lack of experience in dealing with unions, it won’t be easy to effectively handle the new challenges of fine-tuning various workers’ demands.”

Investors are watching closely, said Park Yoo-kyung, an investment adviser on governance at APG Asset Management. “As a long-term shareholder we are concerned, as Samsung is relatively inexperienced in terms of managing industrial relations,” she said. “A strike is not a win-win solution for anyone, especially at a difficult time like this.”

The stand-off at Samsung comes amid a wider crackdown on trade unions in South Korea by the country’s conservative president Yoon Suk Yeol. A former prosecutor, Yoon has described the hardline Korean Confederation of Trade Unions as a “deep-rooted evil”, encouraging state officials and prosecutors to conduct sweeping reviews of alleged illegal union activity. The unions have organised regular street demonstrations in response.

Samsung’s founder Lee Byung-chull, grandfather of the current chair, allegedly declared that unions would be allowed at the firm “over my dead body”. South Korea’s labour unions have a reputation for militancy and companies such as Hyundai Motor have had to grapple with frequent strikes over wages and other working conditions.

In 2019, during the administration of leftwing president Moon Jae-in, state prosecutors alleged Samsung had been involved in union busting, as well as threatening to cut the wages of employees linked to unions and withdrawing business from subcontractors who appeared union-friendly. In 2019 several executives were convicted of union sabotage and, since then, the company has sought to reset relations with workers.

The union now represents about 9 per cent of Samsung’s 120,000 domestic employees, a fraction of the 46 per cent average union membership at big Korean companies.

Membership has grown from just three people to 10,000 in four years, as the union has attracted engineers, researchers and production workers asking for better remuneration and more holidays. While Samsung has long had a reputation as one of the best employers in South Korea in terms of pay and welfare benefits, its salaries have fallen behind some SK Group units.

The union has held more than 20 meetings with company officials this year but the talks have reached an impasse, hence the request for the chair to enter talks. “The absence of top managers at the negotiating table means that they are not properly recognising us as a counterpart,” Son said.

He added that the strike plan would be put to a vote if Lee continued to refuse to talk to them, though they have not set a deadline for his response yet. “We are patiently waiting for his response, given the huge implications that a strike will have on the national economy and the global supply chain,” he said. “You know what happens to a chip plant if the process stops just for a second,” he said, referring to the lengthy process of restarting production.

Union members also complain of the company’s “fear-driven” rigid corporate culture and “too severe internal competition” among workers. They have also called for a safer work environment. In 2018, Samsung compensated workers exposed to harmful chemicals at its chipmaking plants. The company said workplace safety had improved since then and it was investing heavily to make further improvements.

Samsung said it would continue to talk to the union to reach an agreement. “The company guarantees the employees’ right to establish and join labour unions as well as to bargain collectively, and respects lawful union activities under the relevant laws and regulations,” the company said.

Samsung’s anti-labour reputation makes many workers reluctant to join the union. “We need a union to voice our opinions but I don’t want to join it because that may reduce my chances of getting an overseas job or promotion,” said Lee, a Samsung marketer in his early 30s.

Park Ju-geun, head of research group Leaders Index, cautioned that Samsung’s performance-driven remuneration policy made it prone to labour conflicts. He predicted that Samsung was likely to maintain its “high-handed” approach. “Old habits die hard. The way Samsung now treats its unions is not so different from their past practices,” he said. “But it won’t be able to continue to ignore them as their members increase and their power gets stronger.”