Samsung Electronics' Seocho office in southern Seoul [NEWS1]
After marathon talks between Samsung Electronics' management and labor fell apart Wednesday, a planned 18-day strike due to start Thursday moved closer to reality. The country’s labor minister directly joined mediation efforts for the first time on Wednesday, but no agreement had been reached as of press time.
As talks continue, all eyes are on whether the government will invoke its emergency arbitration powers, a last resort that could prevent the strike from snowballing into substantial economic damage, should negotiations fail.
That decision remains uncertain. The government is concerned that wielding this rarely used power, which can ban all collective action for 30 days, could set a negative precedent. During this period, a government body would conduct mediation.
"The government will provide maximum support, unconstrained by formalities, to ensure the matter is resolved through autonomous labor-management negotiations until the very last moment," a Ministry of Employment and Labor spokesperson said, drawing a clear line on the question of emergency arbitration, adding that it was "too early to speak to that specifically."
Any disruption to semiconductor production could ripple far beyond Samsung, affecting the country’s exports as well as major clients such as Nvidia, Apple and Google.
At the heart of the dispute is how bonuses are distributed across Samsung's three different semiconductor units, which cover memory, chip manufacturing and chip design. Of the three, only the memory division is currently profitable, riding the AI-driven surge in demand that has Big Tech lining up to secure supply.
The bone of contention is whether a common pool of special bonuses — shared across the entire semiconductor division — should be large enough to give employees in loss-making units payouts comparable to those in the profitable memory unit. The union agreed to the ratio proposed by the government mediator, but management rejected it, arguing that it violates the company's core principle of tying rewards to performance.
The production of high bandwidth memory (HBM), which is a key component powering global AI infrastructure, is of the greatest concern should the strike proceed.
Choi Seung-ho, the head of the Samsung Electronics chapter of the Samsung Group United Union, left, and Yeo Myung-koo, head of the People Team under Samsung’s Device Solutions division and the company’s chief bargaining representative, speak to the press after the second round of post-mediation talks collapsed in Sejong on May 20. [NEWS1]
Choi Seung-ho, head of the Samsung Electronics chapter of the Samsung Group United Union, confirmed the walkout was going ahead as he left the post-mediation session at the National Labor Relations Commission (NLRC) office in Sejong.
"The union will proceed as planned and lawfully launch a general strike," Choi said. "We wish to make clear that even during the strike, we will not cease our efforts to reach a settlement." He emphasized that the union had agreed to the mediator's proposal — it was management that walked away.
Samsung, for its part, said the breakdown is deeply regrettable, but stood firm. The union's demand to set aside a significant portion of bonuses for loss-making divisions "directly contradicts" its performance-based management principle, the company said.
"The company has determined that abandoning this principle would have an adverse impact not only on Samsung Electronics, but on other companies and industries as well," it added. "Nevertheless, Samsung Electronics will continue its efforts to resolve this matter until the very end, whether through additional mediation or direct dialogue with the union."
Industry observers are estimating losses resulting from the walkout, scheduled to run through June 7, to reach up to 100 trillion won ($66.3 billion) as semiconductor production grinds to a halt. The ripple effects would extend beyond Samsung itself, affecting the broader ecosystem of parts, materials and equipment suppliers that depend on it, and weighing on Korean exports overall.
A court has already granted management an injunction limiting the scope of industrial action, requiring workers to maintain normal staffing levels at safety facilities and in processes that prevent wafer degradation even during the strike. A total of 7,087 workers must remain on-site — 2,400 in safety roles and 4,700 in security operations. The union says 47,200 members have pledged to participate.
A display board at Hana Bank's headquarters in Jung District, central Seoul, shows Samsung Electronics' closing share price on May 20, a day before the chipmaker's union is set to launch a general strike following the collapse of the second round of post-mediation talks. [NEWS1]
The financial damage could ultimately exceed initial estimates. Semiconductor production runs continuously around the clock across hundreds of processes — including photolithography, etching, deposition and cleaning — all requiring highly skilled engineers who cannot simply be replaced. Samsung has already cut new wafer input by 30 percent in anticipation of the disruption. Factoring in the reduced output during the strike, the restart process afterward and the time needed for quality verification, analysts say it could take more than a month for production to normalize, meaning the financial toll could be greater than initial estimates.
Taking into account the reduced production rate during the walkout, the restart process afterward and the time needed for quality verification, analysts expect it could take more than a month for production to return to normal, meaning the financial toll could be greater than what was initially estimated.
The government has made clear it intends to intervene. The presidential office said it was "deeply regrettable" that talks collapsed and urged both sides to "make every effort to reach an agreement until the very last moment, taking into consideration the potential impact on the Korean economy."
President Lee Jae Myung went further, directly challenging the union's core demand to tie employee bonuses to a fixed share of operating profit.
"To institutionalize a condition that sets a certain percentage of operating profit — before even deducting taxes, which belong to the public as a whole — is something that not even investors are entitled to do," he said at a Cabinet meeting on Wednesday. "Investors receive dividends from net profit after taxes have been deducted. Frankly, this is something I find difficult to understand."
Labor Minister Kim posted on X that "it is not over until it's over" on Wednesday afternoon, right before he dove into the latest mediation.
Prime Minister Kim Min-seok has already hinted that the threshold may be met, warning, "If the strike becomes a reality, the economic losses would be beyond imagination." The power has been used only four times in Korean history — invoking it now would be the first time in 21 years. The last instance was in December 2005, when Korean Air pilots walked out over a pay dispute. The government moved swiftly, triggering emergency arbitration just three days into the strike, citing major flight cancellations and public disruption.
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