Samsung Electronics, SK Hynix, LG Electronics and Other Major Electronics Companies Likely to Reduce Performance Bonuses
[Asia Economy Reporter Changhwan Lee] As the Lunar New Year holiday approaches, a cold wind is blowing through the electronics industry. There is a high possibility that performance bonuses will be significantly reduced compared to last year. Last year, the performance of major sectors such as semiconductors and displays declined, dampening employees' expectations for performance bonuses.
According to industry sources on the 22nd, Samsung Electronics is expected to finalize the Excess Profit Incentive (OPI, formerly PS) after the Lunar New Year holiday and pay it around the end of this month. OPI is Samsung's unique and extraordinary performance bonus system that pays up to 50% of the annual salary within a 20% limit of profits exceeding the annual management target.
Samsung Electronics achieved record-high performance in 2018 and paid the largest-ever OPI at the end of January last year. The semiconductor division received 50% of the annual salary, while the mobile division, visual display, and network divisions received 46% of the annual salary.
However, with last year's performance declining, the scale of this year's OPI payment is also expected to decrease. Samsung Electronics' sales last year were KRW 229.52 trillion, and operating profit was KRW 27.71 trillion, down 5.8% and 52.9% respectively from the previous year. Most divisions, including the semiconductor business, showed weaker performance compared to the previous year.
Accordingly, this year's OPI is expected to decrease significantly compared to the previous year. Samsung Electronics already announced internally in August last year that the OPI for major divisions such as semiconductors and mobile could be decided between 20% and 30%, which is about half of last year's level.
The atmosphere is similar among other electronics affiliates. Samsung Display is reported to significantly reduce performance bonuses this year due to poor results in the LCD panel business last year. Samsung SDI and Samsung Electro-Mechanics also showed weaker performance compared to the previous year, raising the possibility of reduced OPI.
The situation is the same for other electronics companies. SK Hynix's performance last year is estimated to have sharply declined compared to 2018. In particular, the operating profit, which was KRW 20.8 trillion in 2018, is estimated by the financial investment industry to have plummeted to about KRW 3 trillion last year. Accordingly, the record-high performance bonus last year, which reached 1700% of the base salary, is expected to be drastically reduced this year.
LG Electronics, which paid performance bonuses up to 500% of the base salary, is experiencing a similar atmosphere. LG Electronics' sales last year were KRW 62.306 trillion, and operating profit was KRW 2.4329 trillion. Although sales were at a record high, operating profit decreased by about 10%. With profits declining, many expect this year's performance bonuses will not reach the record-high level of last year. LG Display also recorded a loss last year, significantly lowering employees' expectations for performance bonuses.
An industry insider in the electronics sector said, "Overall, companies' profitability declined last year," adding, "Employees' expectations for performance bonuses have also somewhat lowered."
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