[Column] The Message Sent by Samsung's Strike Declaration

"HBM Crisis Management Risk" Pointed Out
Must Take to Heart the Weakening of 'Innovation DNA'

Samsung Electronics Chairman Lee Jae-yong said after a business trip to Dutch equipment company ASML in June 2022, "First, second, and third is technology." Kyung Kye-hyun, head of Samsung Electronics' Future Business Planning Group and SAIT (formerly Samsung Advanced Institute of Technology), attended the shareholders' meeting in March as the head of the DS (semiconductor) division and stated, "This year, Samsung's DS division will boldly pursue technologies that do not yet exist in the world, based on a psychological sense of security that 'it's okay to fail'." He emphasized the philosophy that relentless innovation guarantees the company's future and survival.

However, Samsung Electronics received its first-ever strike notice from the labor union since its founding. Lee Hyun-guk, vice chairman of the National Samsung Labor Union (Jeonsamno), said at a strike declaration press conference on the 29th of last month, "The HBM (High Bandwidth Memory) crisis is a management risk issue," adding, "Samsung has many smart and capable employees who could overcome the HBM crisis if they set their minds to it, but the company does not provide fair compensation, so they are not motivated to do so." It can be interpreted that the 'innovation DNA' emphasized by the chairman and division head weakened, leading to a decline in technological capability, which became the pretext for the first strike.

Listening to Samsung Electronics employees, more voices disagree with the union's complaints about the compensation system. It is said that it is inappropriate for Samsung Electronics employees, who received an average of 120 million won last year, to discuss 'performance pay fairness.'

However, the union's point that the 'HBM crisis is a management risk' is worth noting. Inside Samsung Electronics and the industry, there is a widespread sense of crisis that leadership in the HBM semiconductor and DRAM markets might be lost to SK Hynix. There are also voices of self-reflection that Samsung, complacent with being number one in markets like DRAM and NAND flash, failed to properly respond during the AI transition upheaval.

This strike declaration at Samsung is a strong message that the slow and weakened organizational culture must change. Since the union declared a strike immediately after Vice Chairman Jeon Young-hyun replaced the head of semiconductors (DS) last month, restoring organizational morale has become an even more urgent task. Samsung, which had been cautious about replacing president-level (business division heads), made a sudden and unprecedented move by replacing a vice chairman-level (division head), which was considered a bold step. What is expected of Vice Chairman Jeon by Samsung's management and the market is to correct organizational discipline and encourage employees to regain 'super-gap' leadership before it is too late.

Vice Chairman Jeon is a veteran with a history of overcoming crises multiple times. He was also trusted by the late Chairman Lee Kun-hee. After LG Semiconductor merged with Hyundai Electronics in 1999 and he moved from LG Semiconductor to Samsung, he led the development of the world's first sub-20 nanometer (nm; 1 nanometer is one-billionth of a meter) fine process during his tenure as president of the Memory Business Division. He also overcame the crisis of the Galaxy Note7 fire incident, which involved Samsung SDI batteries.

Samsung, which failed to respond to the AI transition, faces concerns that it could be overtaken by SK and become a 'second-place company.' The strike declaration is a warning that Samsung Electronics must revive its innovation DNA. It is time to tighten the loosened reins and once again focus on leading-edge technology competition and securing orders from client companies.