Samsung Electronics' foundry (semiconductor contract manufacturing) division has projected internally that the timing of a return to profit could be later than expected due to the expense burden from a recently introduced special management performance bonus system. While the business's own profitability is improving, increased labor costs from bonus payments appear to be emerging as a new variable.
According to the semiconductor industry on the 12th, Han Jin-man, head of the foundry division (president) at Samsung Electronics' Device Solutions (DS) institutional sector, said at a foundry business status briefing held that day, "Based on the existing performance bonus framework, we expect to return to profit next year, but if we factor in the recently introduced special management performance bonus system, losses could continue."
Last month, labor and management at Samsung Electronics agreed to introduce a special management performance bonus system funded by 10.5% of the DS institutional sector's operating profit. The entire post-tax bonus is paid in treasury shares.
In the industry, some suggest that if the expense from the new bonus system is reflected, the foundry division's losses could continue through 2028. The foundry division has posted multi-trillion-won losses in recent years, but expectations for a turnaround have grown on increased orders for advanced processes and improved utilization. However, as special management performance bonus expenses are reflected in each division's profit and loss, some expect the accounting timing of the turnaround to be delayed. If bonuses paid to staff in shared functions related to the foundry and system LSI are also recognized as each division's labor costs, the expense burden could grow further.
Han cited the expense burden from paying the special management performance bonus, delays in moving away from a mobile-centered business structure, insufficient technical maturity, a low-profit order mix, and shortcomings in the strategy for operating mature (legacy) nodes as reasons for projecting continued losses this year and next.
Han said, "Ultimately, management is responsible for the losses," adding, "We will improve the business structure to raise profitability and move up the timeline for returning to profit."
Regarding organizational operations, it was also shared that, for the time being, personnel movements among divisions within the DS institutional sector will be kept to a minimum.
The briefing was arranged for the division head to directly explain the management status and mid- to long-term vision of the foundry business. Since interest has grown—especially within the non-memory divisions—over how the introduction of the DS institutional sector's special management performance bonus will affect compensation structures and profitability, many related questions and answers were reportedly submitted in advance.