[THE VIEW]Samsung Electronics Faces Union Risk with First-Ever Strike

Restarting Semiconductor Plants Takes Considerable Time
Need to Reduce Possibility of Collective Action Through Negotiation

The National Samsung Electronics Labor Union, the largest labor union within Samsung Electronics, took collective action for the first time in its 55-year history. Centered around dissatisfaction with performance bonuses due to recent poor results, the union demanded improvements to the bonuses and carried out a strike through collective use of annual leave. June 7 was a Friday between Memorial Day and the weekend, known as a bridge holiday, so there was no immediate disruption to work. However, at a time when the company had recently declared crisis management and was stabilizing shareholders through AI chip production and semiconductor business restructuring, the management has now taken on another risk.

Even if it does not affect chip supply or semiconductor production or cause a shortage in shipments, Samsung Electronics must interpret this as a symbolic event showing that it can no longer be safe from 'union risk.' In the semiconductor and chip production industry, union risks directly impact production volume and prices. Since it is not a matter of simply switching on and off, work stoppages due to strikes signify a crisis. Semiconductor plants require considerable time to restart. For example, in 2020, a power outage lasting just about one minute at Samsung Electronics' Hwaseong plant caused damage worth hundreds of billions of won, and it took about three days to resume operations. When the Texas Austin plant was closed for a month due to a cold wave and power issues, losses amounted to $290 million. The losses to be borne if work is completely halted due to union collective action or if the strike period is prolonged are enormous.

Other overseas semiconductor and IT companies may also face union issues, but competitors like Intel (USA) and TSMC (Taiwan) generally have lower union risks. U.S. tech companies have reduced union risks within a legal framework that protects both workers' rights and employers' rights, allowing free hiring and firing. They can hire replacement workers during strikes and request courts to order the suspension of strikes deemed illegal, thus defending themselves. In other words, labor rights are guaranteed in the U.S., but companies are also protected from unions. TSMC experiences minimal union activity due to Taiwan's legal environment and cultural factors. Taiwanese companies generally promote a family-oriented corporate culture, and labor regulations and laws are considered business-friendly.

In the case of Apple in the U.S., Chinese subcontractors handle the production of iPhones and Apple products, but these companies have not experienced production stoppages due to union issues. In China, the establishment of independent labor unions is legally restricted, so company-specific union formation and activities are practically impossible.

How should Samsung Electronics maintain competitiveness in the global market and reduce union risks? Union risks vary according to labor laws in each country. Therefore, it is necessary to diversify production bases across various regions worldwide rather than relying on a specific area to mitigate union and regional risks. Additionally, increasing supply chain flexibility through a systematic approach is needed to minimize the impact of production disruptions in specific factories or regions on the entire supply chain. Above all, it seems important to steadily reduce the possibility of collective actions that disrupt the supply chain through negotiations and dialogue with unions. Having operated the company under a no-union management policy for over 50 years, urgent measures such as establishing concrete and long-term plans to improve relations with unions are required.

Kyung Na Kyung, Professor, Department of Computer Science, National University of Singapore