As labor and management remain far apart over Samsung Electronics' bonuses, voices inside and outside Samsung say there are flaws in the framework of the long-standing bonus system. That is because it is hard to find examples of such a system among U.S. and European semiconductor corporations competing with Samsung Electronics. Taiwan's TSMC and MediaTek run somewhat similar systems, but they allocate about 1% of operating profit to bonuses.
On the 7th, according to the industry, most U.S. and European integrated device manufacturer (IDM) semiconductor corporations similar to Samsung Electronics set annual management targets (operating profit, technology development, strategic tasks, etc.), calculate achievement rates for each metric, and then pay bonuses based on contribution, rather than relying on the concept of excess profit sharing. Systems that allocate a fixed portion of operating profit to bonuses are extremely rare.
◇ U.S. and Europe quantify target achievement; Korea's bonus system is slapdash
Samsung Electronics' flagship bonus system consists of the Over-Profit Incentive (OPI) and the Target Achievement Incentive (TAI). OPI is a profit-sharing bonus paid when a business unit exceeds its annual target. OPI funds are calculated based on economic value added (EVA) or excess profit, and individual payments are capped at 50% of annual salary. TAI is a bonus paid based on semiannual business unit evaluations and the degree of target achievement.
The issue is that this bonus system is based on Korean large-corporation-style meritocracy that began in the 1990s and took shape into the early 2000s. Samsung Electronics introduced a profit-sharing bonus called PS in 2001 and changed it to OPI in 2014. Although the name changed, the broad framework of distributing results ex post when excess performance occurs remained. It served as a strong reward mechanism during boom times, but criticism has persisted that the calculation method is opaque, and debates over the 50% of annual salary cap have repeated.
The bonus systems of U.S. and European semiconductor corporations are fundamentally built on a system that calculates individual employee performance, verification, and rewards using detailed metrics. Rather than automatically allocating a certain percentage of excess profit to the bonus pool, they have long maintained a principle of determining a bonus multiple by measuring the achievement rate of management targets, the company's financial condition, and individual performance.
Intel is cited as a representative case and the industry standard. Intel's annual cash bonus incorporates 20% each from company revenue, gross margin, operating expense, strategic tasks known as ITJ (Intel Top Jobs), and individual performance. An Intel official said, "Unlike other industries, semiconductor corporations incur massive investment and maintenance costs on a quarterly and annual basis, so it is common to evaluate performance and rewards more granularly and clearly," adding, "Not only the processes and product shipment volumes targeted by the company but also whether sustainability goals are met play a significant role."
Micron of the United States, a competitor to Samsung Electronics and SK hynix, likewise has no clause that sets aside a fixed portion of operating profit for the bonus pool, similar to Intel. For Micron's short-term incentive (STI), the structure is 50% profitability targets and 50% strategic targets; even if revenue exceeds targets, payment is made considering technology, expense, and sustainability included in the strategic targets. Europe's STMicroelectronics, Infineon Technologies AG, and NXP differ in detail, but it is hard to find provisions for automatically distributing excess profit.
◇ Any way to preempt excessive union demands?
The issue is that Samsung Electronics is not a company that only runs a memory semiconductor business. Samsung Electronics also has design divisions such as foundry (contract chip manufacturing) and system LSI, and across the company it encompasses diverse business groups including the wireless division covering smartphones, TVs, and home appliances. Even globally, corporations that possess such a wide range of advanced tech businesses are rare.
For this reason, it is also difficult to apply overseas semiconductor corporations' methods to Samsung Electronics as is. A person well-versed in Samsung Electronics said, "Even when the smartphone business accounted for 70% to 80% of the company's operating profit, there was always controversy among employees over the fairness of bonuses," explaining, "While there is a positive aspect of a virtuous investment cycle in which the growth of one division is built on the groundwork laid by other divisions in the past, employees, conversely, tend to focus only on the compensation given to them immediately."
An executive in the business community said, "Fundamentally, Samsung Electronics' bonus system is more worker-friendly than in the United States or Europe," adding, "But in an unusual market situation, sudden large profits were made, and a competitor's (SK hynix) unusual 'cash splash' sparked tensions, creating discontent as bonus calculations that should reflect the characteristics of each division and the performance of teams and individuals are being set."