Labor-management conflict at Samsung Biologics is escalating toward a general strike.
The Samsung Biologics Win-Win Labor Union held a large-scale rally to vow a fight at the Incheon Songdo headquarters on the 22nd and warned of a full strike on May 1. Management has filed for an injunction to ban industrial action in response.
The company's labor-management conflict surfaced after an incident last November in which employees' personal information was exposed on the internal network. The union demanded compensation and follow-up measures, and the company continued consultations, but the two sides failed to resolve the conflict due to differences of opinion, and it spread into a dispute over wages and performance bonuses.
The union is demanding a 14% average wage increase and expanded performance bonuses, while management has proposed a 6.2% raise.
Park Jae-seong, Chairperson of the Samsung Biologics Win-Win Labor Union, said at the rally to vow a fight, "We held 13 rounds of talks, but there were no substantive negotiations, and management dragged its feet by repeatedly asking for explanations," adding, "If the company does not change, starting May 1 we will use every possible means to push through our demands."
In the industry, some say that if a strike becomes a reality, it could affect not only short-term production but also medium- to long-term order competitiveness and investment capacity.
◇ "Labor strife also a variable in actual order negotiations"
According to ChosunBiz reporting, the labor-management conflict at Samsung Biologics is acting as a variable in negotiations with some global clients.
When the labor dispute stemming from the internal leak of employees' personal information became known externally last November, Samsung Bio was continuing discussions to win a contract for an Antibody-Drug Conjugate (ADC) medicine contract development and manufacturing (CDMO) order with Global Pharma A, but A expressed concerns about the labor dispute during the talks, and the final contract reportedly fell through.
It actually affected the company's core revenue driver—order-taking activities. A union member at the company said, "It is hard to see labor risk as the only reason the order fell through, but it may have acted as one of the contract variables."
The industry is also keeping a close watch on the situation. That is because even a one-day stoppage due to labor strife is a serious matter that could cause losses worth hundreds of billions of won.
corporations engaged in the bio CDMO (contract development and manufacturing) business tout on-time delivery and process stability, as well as production capacity, as core competitiveness. Samsung Biologics, Switzerland's Lonza, and China's WuXi Biologics are representative.
These corporations sign long-term contract manufacturing deals with clients and produce medicines based on specific production facilities and processes. In this process, the process conditions, facilities, and quality control systems are fixed in advance and are not easily changed after the contract.
◇ "A one-day halt triggers cascading losses"… production stability at risk
In the industry, given Samsung Bio's annual production capacity, a simple calculation estimates output at about 100 batches a day (batch: one production run of a biopharmaceutical). The analysis is that if a process is halted, cascading losses could occur across multiple batches.
Biopharmaceutical production lines are structurally different from general manufacturing processes that can stop and restart. Because they are continuous processes using living cells, if interrupted, it is structurally difficult to restart immediately under the same conditions. If a process stops, cells under cultivation can be damaged, and the batch in question is highly likely to be discarded.
The U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) require impact assessments and revalidation procedures upon process changes or interruptions, under the principle that drug manufacturing processes must maintain consistency and reproducibility.
An industry official explained, "Continuity is crucial in biopharmaceutical production due to the nature of the products," adding, "If there is a history of delayed delivery or unstable production, it works to one's disadvantage in new order competition, and existing volumes may move to competitors."
Lee Seung-gyu, vice chair of the Korea Biotechnology Industry Organization, said, "It's regrettable that uncertainty has arisen at a time when the global CDMO industry landscape is not fixed and corporations representing key countries are fiercely competing and leapfrogging one another," adding, "We hope the Samsung Bio labor dispute is resolved smoothly and swiftly."
◇"Guarantee of collective action rights" vs. "essential operation" to be decided by the court
The crux of the labor dispute is whether personnel in the cell culture and purification processes can join the strike. Article 38 of the Trade Union and Labor Relations Adjustment Act states that work to prevent the deterioration and spoilage of raw materials and products must be carried out as normal even during a labor dispute.
Based on this, management says production processes must be maintained even during industrial action. The union, meanwhile, argues that management is infringing on constitutional rights to collective action. In a strike ballot among members, more than 95% reportedly voted in favor.
The court held a hearing on the 9th and closed arguments on the 16th. A decision on whether to grant the injunction is expected soon.
If the union's demands (a 14% average wage increase) are simply applied, additional expense in the tens of hundreds of billions of won could occur—about 410 billion won based on 20% of operating profit, and about 110 billion won for a 30 million won bonus per person. However, this is a simple calculation based on the disclosed demands, and the actual burden could vary depending on the payment method and calculation standards.
Some in the industry say that, given the structure of the biopharmaceutical CDMO business, which entails accepting certain risks such as production stoppages, quality risks, and uncertainty in contract fulfillment, it is necessary to consider the company's burden factors as well when designing a compensation framework.
Samsung Biologics completed and is operating Plant 5, the first production facility at the Songdo Campus 2 in Incheon, last year. The company is also proceeding with investments to establish Bio Campus 3 by 2034 by injecting about 7 trillion won. Through this, the company aims to create more than 10,000 new jobs.
The company will announce its first-quarter results this afternoon. According to the securities industry, Samsung Biologics' first-quarter results were estimated at around 1.298 trillion won in revenue and 612 billion won in operating profit. Compared with the same period a year earlier, revenue is at a similar level, while operating profit increased by more than 25%. Given the nature of the CDMO business, these results reflect production and delivery of long-term orders already secured. New order performance is reflected in future results with a time lag.
Last year, the company's annual revenue on a consolidation basis rose about 30% from a year earlier to 4.557 trillion won, and operating profit increased 56.6% to 2.0692 trillion won.