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“This Is Not the Samsung Electronics We Once Knew” — Why a Former Samsung Executive Said This
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When the smartphone (DX) division ruled the global market and generated astronomical amounts of cash, that money was reinvested into the semiconductor (DS) division’s massive facility expansion and R&D efforts — even during periods when semiconductors were not immediately profitable.
This organic virtuous cycle, in which finished products generated profits while components secured the future, was the very DNA that allowed Samsung Electronics to survive the massive waves of industry cycles.
Recently, labor and management narrowly avoided the worst-case scenario of a shutdown through a dramatic tentative agreement. Yet investors and industry insiders remain coldly skeptical. The agreement did not resolve the structural causes of the conflict; it merely suppressed the pain temporarily to avoid an immediate strike.
Behind the unprecedented strike threat lies not merely dissatisfaction over workload, but a deep-rooted combination of “FOMO syndrome” — fear of being left behind — triggered by a rival company’s radical compensation philosophy, along with structural contradictions in the compensation system itself.
The fuse of today’s bonus conflict was lit by SK hynix’s overhaul of its compensation structure. At the time, SK hynix removed caps on bonuses and publicly disclosed compensation criteria in order to prevent talent outflows. As employees pocketed hundreds of millions of won thanks to the AI-driven HBM boom, Samsung Electronics workers immediately developed a strong sense of relative deprivation.
But this situation must be viewed coldly. The semiconductor industry is a national strategic industry that requires enormous fixed costs and must endure brutal cyclical downturns every few years. A culture of unlimited compensation during boom periods inevitably becomes a deadly boomerang not only for one company but for the entire industrial ecosystem.
Financial Risk and Investment Depletion: Compensation expectations inflated during boom cycles inevitably become massive financial burdens and sources of labor conflict during downturns. This vicious cycle spreads beyond semiconductors into automobiles, shipbuilding, chemicals, and other key manufacturing sectors, ultimately draining long-term investment resources from major corporations.
Collapse of Industrial Ecosystems and Supply Chains: Excessive salary wars among conglomerates vacuum up talent from small and mid-sized suppliers that form the backbone of the semiconductor ecosystem. Unable to keep pace with large corporations’ compensation increases, suppliers face chronic labor shortages and even existential crises, threatening the collapse of Korea’s entire manufacturing supply chain.
Departmental Egoism and Declining Technological Competitiveness: A culture obsessed solely with short-term performance and division-specific rewards inevitably raises walls between departments. The mentality of “If it’s not my division’s achievement, I won’t help” becomes the greatest obstacle to next-generation convergence technologies, ultimately eroding the nation’s technological edge.
The problem has been further intensified by external political and legal environments that legitimize militant union tactics. In particular, legal and institutional moves such as the so-called “Yellow Envelope Law,” which broadens the definition of employer responsibility while sharply restricting corporate damage claims against illegal strikes, have completely disrupted the balance of power between labor and management.
The signal that “there is nothing to lose from striking” effectively encourages militant behavior that takes hostage semiconductor production lines that must operate 24 hours a day without interruption.
The real spark hidden behind the relief of the tentative agreement is the inequality and contradiction embedded within the compensation system itself.
Even divisions that quietly generated stable profits often receive smaller bonuses — or none at all — compared with divisions that posted astronomical losses amounting to tens of trillions of won. As long as a structure persists where “loss-making divisions demand larger rewards based on memories of past boom cycles while profitable divisions are neglected,” internal conflict will never end.
The clearest solution would be to boldly introduce a dual structure combining a company-wide shared performance pool and independent divisional pools.
A certain portion of overall bonus resources should be guaranteed as a stable base performance bonus reflecting company-wide contributions and the efforts of profitable divisions that quietly supported the company behind the scenes.
Meanwhile, high-risk, high-return divisions should adopt a “clawback” system that forcibly reserves part of boom-time earnings as buffers for downturn periods.
Another urgent task is eliminating the illusion embedded in bonus calculation standards.
Many labor unions currently demand bonuses based on operating profit. But this contains a major trap. After accounting for depreciation from massive facility investments and foreign exchange losses, a company’s net income — the actual money remaining in its coffers — may still be negative.
Holding a bonus festival simply because operating profits appear positive on paper, while actual net income remains in deficit, amounts to consuming the company’s future.
Therefore, performance KPIs should shift away from operating profit toward metrics such as Economic Value Added (EVA) or Free Cash Flow (FCF).
EVA represents genuine profit after subtracting all capital costs, including opportunity costs of investment capital. Generating only a few trillion won in operating profit after investing tens of trillions cannot truly be considered profitability.
Using EVA or FCF — actual cash flowing into corporate accounts — as compensation standards would fundamentally eliminate the contradiction of paying bonuses while net profits remain negative. Employees themselves would be forced to confront the realities of capital allocation.
At this point, one fatal contradiction must be addressed.
Insisting exclusively on operating profit as the basis for compensation while permanently demanding boom-era rewards is fundamentally a one-sided argument designed solely to maximize labor interests.
Ironically, the Silicon Valley big tech firms and global semiconductor giants frequently cited as models by Korean labor circles operate generous stock options and uncapped compensation systems. Yet behind these glamorous reward structures lies a harsh reality Korean labor activists often ignore: extreme employment flexibility.
When downturns arrive or business strategies shift, American corporations conduct large-scale layoffs based on managerial judgment. The reason they can distribute enormous bonuses during boom cycles is because they possess institutionalized safety valves allowing them to immediately reduce fixed costs during crises.
In contrast, employment structures at Korean conglomerates remain extremely rigid. Legally, mass layoffs are virtually impossible, while salary and bonus standards raised during prosperous periods are extraordinarily difficult to lower later.
Demanding American-style uncapped compensation while simultaneously insisting on Korean-style rigid employment protection is disastrous for globally competitive corporations.
Without American-style labor flexibility, holding endless bonus festivals based solely on operating profit effectively destroys a company’s ability to manage risk.
Samsung may have extinguished the immediate fire through this tentative agreement, but the deeper existential crisis — the transformation into a culture obsessed with compensation supremacy — remains entirely unresolved.
Continuing temporary patchwork solutions merely to prevent talent departures or labor strikes is neither worthy of Samsung Electronics nor sustainable for corporate survival.
Compensation standards must be transparent, but they must also remain firmly linked to corporate survival and long-term cash flow.
The real question is simple: Will the company slaughter the goose that lays golden eggs to divide the meat today, or will it raise the goose larger and healthier to secure sustainable prosperity for the future?
jinannkim@gmail.com
#SamsungElectronics #SemiconductorIndustry #LaborCrisis
* This article has been translated by ChatGPT.