"Small and medium-sized enterprise workers and business owners watching the Samsung Electronics labor negotiations feel a heavy heart. Amid a dispute over bonuses worth hundreds of millions of won, it is doubtful whether Samsung's partner SMEs have received fair compensation in return." — Korea Federation of Small and Medium Business
Samsung Electronics narrowly averted a "semiconductor shutdown" crisis after management and its union reached a landmark agreement, with the entire nation watching. Under the deal, a fixed share of around 10 percent of business performance will be set aside as a bonus pool, allowing employees in the semiconductor (DS) division to receive up to 600 million won (about $397,000) in bonuses this year — before taxes, based on an annual salary of 100 million won. Even workers in the non-memory chip division, which is likely to post a loss this year, will receive a minimum of 160 million won. The special performance bonus draws on 10.5 percent of business results as agreed by labor and management, with no upper limit on the payout rate.
The concern is that the wage gap will widen further between the small number of companies — like Samsung Electronics, riding a boom — that can afford to adopt an uncapped "X percent of operating profit" bonus model, and everyone else. The "share of operating profit" formula that emerged from the Samsung Electronics negotiations is spreading to other industries. The unions at Hyundai Motor and Kia have for years demanded that 30 percent of net profit be used as the bonus benchmark. Kakao's union is preparing to strike, pressing management to establish a bonus standard equivalent to 13 to 14 percent of operating profit. The union at Samsung Biologics, a Samsung Electronics affiliate, staged the company's first-ever full strike from May 1 through May 5, demanding that 20 percent of operating profit be set aside for bonuses with no ceiling.
For most SME workers and business owners, the spectacle was a bitter one. In practice, total annual wages at companies with fewer than 300 employees came in below 50 million won last year. According to the Korea Employers Federation, the average total annual wage for regular workers last year — including base pay and special allowances but excluding overtime — was 50.61 million won nationwide, and just 45.38 million won at firms with fewer than 300 employees. The combined salary and bonus figure of 700 million won is more than 14 times the annual total wage of an SME worker.
This is not simple envy of a neighbor's good fortune. Outside a handful of sectors — semiconductors, shipbuilding, defense and power equipment — most industries struggle to offer operating-profit-linked bonuses while still securing the capital needed for facilities investment and research and development to sustain growth. Large-scale bonuses tied to company size deepen polarization in the labor market. The inevitable result is a vicious cycle in which talent gravitates toward large companies offering higher compensation, leaving SMEs struggling to fill positions.
Samsung Electronics wields strong influence over the SME ecosystem. According to the company's sustainability report, Samsung Electronics had 1,061 first-tier partner companies and 693 second- and third-tier partners as of 2024. The semiconductor industry, by its nature, operates through a multilayered structure spanning materials, components and equipment — meaning a wide range of small and mid-sized firms are bound up in Samsung Electronics' production schedules. A single production line at Samsung Electronics' Pyeongtaek campus is also said to support roughly 30,000 jobs, including those at partner companies.
Samsung Electronics occupies an outsized place in the Korean economy. The company accounts for 12.5 percent of domestic GDP by sales and employs some 129,000 people, making it a true national champion. It is the world's top semiconductor maker and holds a quarter of the domestic stock market's total market capitalization. One in 10 Koreans is a shareholder. Both the company and its union need to act accordingly.
By Kang Moon-gyu, head of the SME, venture and biotech desk
mkkang@heraldcorp.com
