Samsung's $20 billion bonus deal fuels wage demands beyond AI sector

This article is by Lee Jae-lim and read by an artificial voice. [NEWS ANALYSIS] The AI boom propelled Korean chipmakers to unprecedented profit, ushering in a new bonus system tying payouts to a fixed percentage of annual profits that amount to six times an employee's annual salary or more. Samsung's tentative agreement, following in the footsteps of SK hynix, lays the groundwork for a so-called AI bonus, prompting labor unions at firms not considered major beneficiaries of the AI boom to raise similar demands. The push has spread across industries, from Samsung Biologics — Samsung's contract drug manufacturing affiliate — to information technology companies, telecoms and shipbuilding, with HD Hyundai's shipbuilding units and Hanwha Ocean among those demanding a significant share of operating profit be set aside for employee bonuses. From next year, 10.5 percent of the profit from Samsung's semiconductor division from the previous year — stripping out one-off gains such as currency effects — will be distributed as performance bonuses to employees over the next decade in the form of company shares, with the previous cap on payouts removed. However, the arrangement comes with conditions. The division must generate at least 200 trillion won ($133 billion) in operating profit annually between 2026 and 2028, and maintain annual profitability of at least 100 trillion won from 2029 to 2035. Of that 10.5 percent, the bonus pool is split two ways. Forty percent is shared equally across the three units within the semiconductor division — memory, chip manufacturing and chip design — while the remaining 60 percent is distributed based on each unit's performance. Since only the memory division is expected to turn a profit this year, driven by the AI and high bandwidth memory boom, it is likely to claim the entire performance-based 60 percent pool. Divisions without direct revenue — such as human resources, finance and research and development (R&D) — will receive 70 percent of whatever the memory division takes home. Based on market estimates that Samsung will generate 300 trillion won in operating profit this year, workers in the memory unit could receive bonuses of up to 600 million won per person next year. Even employees in nonmemory units stand to receive around 160 million won each from the common share pool. This year serves as a grace period, during which nonmemory units will receive their full 40 percent allocation regardless of performance. From next year onward, however, employees in units still operating at a loss will receive only 60 percent of their maximum potential bonus from the common pool. For now, the deal has averted the worst-case scenario of a production disruption that could have caused damages of up to 100 trillion won. The agreement must still be ratified by a majority vote among Samsung union members, with voting running from Friday through May 27. Jun Young-hyun, Samsung Electronics vice chairman and semiconductor division head, thanked the union on Thursday for reaching a tentative agreement and urged members to vote in favor. "What matters most now is that we put the period of conflict behind us and move forward as one," he said. "We believe that with mutual respect and trust as our foundation, we can achieve an even greater leap together." Experts, however, are already warning of potential ripple effects across other industries if Samsung's new compensation standard sets a broader precedent. Ripple effects across labor The unprecedented chip upcycle has fueled employee demands for a larger share of earnings. But Samsung's deal is already setting the stage for unions across other industries to follow suit. In the shipbuilding sector, which is on the road to profitability after a prolonged downturn, unions at HD Hyundai Heavy Industries and HD Hyundai Samho are demanding that 30 percent of operating profit be paid out as performance bonuses, while the union at Hanwha Ocean is calling for a sweeping overha...