Semiconductor profits and appliance losses fuel growing internal tensions over performance bonuses
Members of the Samsung Electronics Trade Union Joint Struggle Headquarters shout slogans on the afternoon of the 23rd at a rally held in front of Samsung Electronics’ Pyeongtaek business site in Pyeongtaek, Gyeonggi Province. (Photo, joint press coverage)
An intensifying dispute over performance bonuses within Samsung Electronics has escalated to the point where a “physical spin-off” is now being discussed. The fact that Samsung Electronics houses both its DS (Device Solutions) division, which oversees the semiconductor business, and its DX (Device eXperience) division, which oversees the smartphone and home appliance businesses, within a single legal entity has fueled conflict not only between labor and management but also among employees themselves, prompting talk of a corporate split.
The need for a physical spin-off has been raised inside and outside the company for some time, but it has now surfaced more prominently as the company finds itself in crisis amid a threatened general strike and deepening labor-management tensions. However, the prevailing analysis holds that an actual split remains unlikely given the financial and strategic burdens it would entail.
According to industry sources on April 29, the Samsung Electronics trade union has called for performance bonuses equivalent to 15% of operating profit with no ceiling, and has signaled a general strike for next month. Based on the estimated operating profit of 305 trillion won (approximately $207 billion) that securities analysts have projected for Samsung Electronics this year, the demand would amount to roughly 45 trillion won.
The central issue is the profit structure. Because the vast majority of this year’s earnings are expected to come from the DS division, any implementation of the union’s demands would concentrate bonus benefits within DS as well. The DX division, by contrast, would inevitably be left on the margins, and internal pushback is growing. Some DX employees have reportedly expressed a sense of relative deprivation and are even showing signs of withdrawing from the union.
A senior Samsung Electronics official recently raised the prospect of a physical spin-off in discussions with the government, a move that appears to stem from the deadlock in wage negotiations and deepening internal divisions. Among some employees, the bonus dispute has given rise to factional divisions and mutual criticism, raising concerns about damage to the company’s organizational culture.
From the company’s perspective, it is difficult to overlook the contributions of the DX division, which carried the company’s overall performance during difficult periods. In 2023, when the DS division recorded a loss of 14.9 trillion won, the MX (Mobile eXperience) business unit generated 13 trillion won in operating profit, effectively keeping the company afloat. The point is that mobile phone sales once offset losses in the memory business. This year, however, surging memory semiconductor prices have driven up costs to the point where the MX division itself could potentially post an annual loss. Within the same legal entity, rising memory prices benefit one side while harming the other.
Separating the DS and DX divisions into distinct legal entities would allow performance bonuses to be determined independently according to each division’s profit and loss, offering a structural resolution to the compensation dispute. Underlying this thinking is the recognition that applying a uniform compensation framework is inherently problematic when two fundamentally different business structures coexist within a single legal entity, as they do at Samsung Electronics.
The market, however, largely views a physical spin-off as an impractical option. Analysts suggest the remarks are better understood as an expression of frustration with the current state of wage negotiations rather than a genuine indication of intent. The senior official in question reportedly prefaced the remarks by acknowledging that “a physical spin-off would be difficult.”
The biggest obstacle is the appraisal rights mechanism. Unlike a personal spin-off, a physical spin-off does not distribute shares of the newly established company to existing shareholders. As a result, shareholders opposed to the split can exercise their right to demand that the company repurchase their shares as a means of protecting their interests.
Given Samsung Electronics’ market capitalization of 1,320 trillion won in common shares, the exercise of appraisal rights could trigger an astronomically large cash outflow. Furthermore, the market’s view is that any attempt at a physical spin-off of the DS division, which represents the very core of Samsung Electronics’ value, would be effectively impossible from the outset.
Even if the company were to honor all shareholder demands under the appraisal rights mechanism, the repurchased shares would be classified as treasury shares and would be required to be disposed of rather than retained under the third amendment to the Commercial Act. An industry official noted, “The company would have to absorb enormous losses in the process, and that is one of the factors that makes a physical spin-off practically impossible.”
Capital market reaction presents another complication. If a subsidiary were to be listed following a physical spin-off, it is highly likely that the longstanding controversy over so-called “carve-out listings,” the argument that such arrangements erode the value held by existing shareholders, would be reignited. This would also run counter to the government’s current regulatory stance toward carve-out listings. There is also a view that selecting a physical spin-off as the means to resolve an internal conflict would not justify the costs involved. An industry official emphasized, “The performance bonus dispute is fundamentally a compensation structure issue, and attempting to resolve it through a governance overhaul could end up causing even greater costs and confusion.”
For these reasons, the weight of analysis leans toward viewing the current spin-off discussion less as a realistic course of action and more as a signal of how serious the company’s internal tensions have become. An industry official echoed this, saying, “Rather than indicating that a physical spin-off is actually being considered, this shows just how difficult the company’s situation has become.”
Jung Suk-yee
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