As Samsung Electronics labor and management broke off 2026 wage negotiations over abolishing the cap on performance bonuses, it was confirmed that a war of words erupted over the compensation system during intensive talks held from the 10th to the 19th on the 10th to the 19th of last month. The company opposed lifting the cap on performance bonuses, citing pressure on free cash flow (FCF) from large-scale capital expenditures (CAPEX), while the union countered by pointing to compensation levels that lag rivals.
According to the Samsung Electronics wage bargaining minutes obtained by ChosunBiz on the 5th, labor and management traded sharp barbs over securing funds for performance bonuses, distrust of the performance bonus calculation standard (EVA), stock-based special compensation, and a tiered structure for incentives by business unit.
◇ "Even if we earn 170 trillion, there's nothing to distribute" vs. "One-third of competitors"
The company's defense against the union's demand to abolish the performance bonus cap was "limits to funding." According to the minutes, the management's chief negotiator said, "Even if operating profit reaches 170 trillion won, there is almost no improvement from an FCF perspective after excluding capital expenditures, R&D, and taxes." The argument is that lifting the cap is financially untenable because large-scale investment to maintain a super-gap in semiconductors must take priority.
Management in particular expressed a sense of crisis by citing the external competitive landscape. A management official in the minutes said, "On 5 out of 10 technology competitiveness indicators, China is already ahead of us," stressing the rationale for not cutting investment.
The union urged a fundamental change in the compensation system, citing the risk of talent outflow. A union Commissioner said, "Memory employees receive only one-half to one-third of what employees at competitors (SK hynix) get, so retention is not happening."
The union also cited an extreme example, saying that when a competitor receives 400 million won, the Samsung Electronics foundry division receives about 40 million won, and explained that the sense of relative deprivation felt by internal members is severe.
Overt distrust also surfaced toward EVA (economic value added), the existing performance bonus metric. The union said, "Operating profit can be verified in figures, but EVA uses internal calculations, so employees do not trust it," and demanded a shift in the performance bonus standard to a transparent, operating-profit-centered basis.
◇ Blame game over foundry losses… "Are you telling us to shut down the business?" vs. "Don't shift failed investments onto us"
During discussions on performance bonus gaps by business unit, a fierce exchange broke out over the viability of the foundry and System LSI divisions and responsibility for losses. When the union, pointing to the relative deprivation of personnel excluded from compensation because their units are in the red, mentioned adjusting the pace of capital investment, management reacted heatedly, saying, "Are you telling us to invest less in foundry? Then are you telling us to shut down the foundry business?"
Management went on to say, "The foundry posted multi-trillion-won losses last year and before that as well. If not for the Samsung umbrella, it would already have closed," underscoring the cold reality. The union countered, "Don't frame it as a loss-making division; face the structure in which losses occur due to excessive investment expense."
In particular, when the union said, "If foundry work is under-rewarded anyway, who will work hard?" management shot back, "Conversely, if memory is paid the same as foundry, who will work hard? Wouldn't people just show up for work?" holding firm to the rationale for differentiated pay.
◇ Despite an "unprecedented compensation plan," talks end in failure… Union begins strike procedures
During the talks, management presented a bold simulation plan to shore up performance bonus competitiveness. Assuming operating profit reaches 100 trillion won, management explained that for grade A employees, total compensation could reach up to 210% of annual salary when combining OPI and special compensation. Separately, for the loss-making foundry and System LSI organizations, management also put forward a card of individual incentives (retention compensation) to keep key personnel.
But the payment method became a stumbling block. The special compensation would be paid in stock with a selling restriction for a certain period, and if an employee voluntarily resigned during that period, the stock would be clawed back. The union labeled this a "restriction" aimed at tying employees down and refused to accept it.
In the end, despite management's forward-leaning proposal on the size of compensation, Samsung Electronics labor and management declared a breakdown in talks without resolving the conditional clauses in the stock payment method and the imbalance in compensation among business units. Following the collapse of negotiations, the union immediately began preparing for industrial action.
The union will shift to a joint bargaining team and joint struggle headquarters structure and will soon hold a strike ballot among members. If a majority votes in favor, an unprecedented strike in the history of Samsung Electronics' semiconductor industry could become a reality. An industry official said, "If union risks materialize in earnest, a hit to Samsung Electronics' technological competitiveness and productivity will be unavoidable."