Volkswacht Bodensee - Union calls strike at South Korea chip giant Samsung Electronics

The walkout, set to begin Thursday, is expected to dwarf a 2024 strike that drew about 6,000 workers at the world's top memory chipmaker.

The dispute centres on profit-sharing at a key player in the global semiconductor supply chain, with its chips widely used in artificial intelligence systems and consumer electronics.

The tech giant's shares have surged nearly 400 percent over the past year on the back of an AI boom, and saw its market capitalisation top $1 trillion for the first time in May.

The union had called for the scrapping of a bonus cap set at 50 percent of annual salaries and for 15 percent of operating profit to be allocated to bonuses.

"Around 10:00 pm on May 19, the labor union agreed to the mediation proposal put forward by the National Labor Relations Commission; however, management expressed its refusal," it said in a statement on Wednesday.

"The labour union will lawfully commence a general strike tomorrow as scheduled."

According to the union's lawyer, around 50,500 workers are set to walk off production lines for 18 days from Thursday following the breakdown of negotiations with management.

Samsung's management said the talks failed because "acceding to the labour union's excessive demands would risk undermining the fundamental principles of the company's management".

"Under no circumstances should a strike take place," it said.

Concerns are growing within the South Korean government that a prolonged union strike could hurt the export-driven economy, with chips making up about 35 percent of exports.

South Korea's presidential office voiced "deep regret" over the collapse of the talks, urging both sides to keep working toward an agreement given the strike's "potential repercussions for the Korean economy".

Some experts say even a partial halt in Samsung's operations could prove damaging -- though the union argues that production stoppages have already occurred in the past for reasons related to maintenance and equipment inspections.

The government could invoke emergency mediation powers -- a measure that could halt strikes or other industrial action and trigger mediation if they are deemed a threat to the national economy.

- Limited impact? -

But Tom Hsu, an analyst at Taipei-based research firm TrendForce, said the strike's potential impact may be limited.

"Due to the high level of automation in front-end facilities, TrendForce expects Samsung's DRAM and NAND Flash production to remain at full capacity," he told AFP.

"Any potential impact from the strike is likely to be confined to non-memory business segments."

A Suwon court this week granted Samsung Electronics an injunction requiring staffing and operations to be maintained at normal levels during any walkout.

Kim Sung-hee, director of Workers' Institute for the Industrial and Labour Policy, said that while the strike could cause losses, "they are unlikely to be irreversible".

The strike does not mean it would "automatically trigger an economic crisis," he told AFP.

- AI boom -

Samsung is a major producer of chips used in everything from artificial intelligence to consumer electronics, raising the prospect that the planned strike could cause severe disruption and losses.

The company said this year it had begun mass production of next-generation high-bandwidth memory chips, HBM4, seen as a key component for scaling up the vast data centres needed for AI development.

The dispute unfolds against the backdrop of an AI boom that is benefiting South Korean tech groups, boosting national growth and the stock market.

Both Samsung and its domestic rival SK hynix posted record profits in the first quarter, driven by global demand for AI chips.

Long staunchly anti-union, late founder Lee Byung-chul once vowed never to allow unions "until I have dirt over my eyes".

Samsung Electronics' first labour union was formed in the late 2010s.

R.Buehler--VB