Against the background of skyrocketing profits in the memory business and rising union sentiment, Samsung Electronics was revealed to be discussing a plan described by insiders as the "nuclear option" - to split the Device Solutions (DS) division, which focuses on the semiconductor business, into a brand new company to weaken the union's negotiating leverage at the group level. According to reports, as the "money bag" of Samsung's storage business has rapidly expanded, employees from other less profitable departments have also begun to demand simultaneous increases in wages and bonuses, causing strong dissatisfaction among management.
At a recent meeting with South Korean government officials, Samsung participants mentioned the spin-off idea "offhand", saying that the huge profit differences between Samsung Electronics' different business segments made it difficult for the company to copy the high-level salaries of the semiconductor department to business lines such as home appliances, which became the focus of pressure from labor unions. However, the person also admitted that such a large-scale structural restructuring is very likely to trigger a strong backlash from shareholders, especially because of the risks of potential company value being diluted and the group's overall premium declining.
Currently, Samsung's labor union is confronting the company with an unprecedented tough stance. The union demands that about 15% of the company's annual operating profits, totaling about $30 billion, be used as bonuses, otherwise it will launch an 18-day general strike from May 21 to June 7. This request was regarded by management as "too radical" and was the core crux of the standoff between the two parties.
To demonstrate its mobilization capabilities, Samsung’s labor union held a large-scale rally on April 23, with approximately 40,000 participants. On the day of the rally, the output of Samsung's highly automated memory factory was estimated to have dropped by about 18.4%, while the production capacity of its wafer foundry production line, which relies more on labor, plummeted by about 58.1%, posing a substantial impact on the company's operations. Industry analysts point out that once routine equipment care and maintenance is suspended for a long period of time, the difficulty and cost of restoring production lines will rise sharply.
Some estimates believe that if the union implements an 18-day strike as planned, it may take as long as 36 days for Samsung's semiconductor production lines to return to normal levels, which is equivalent to "18 days of shutdown and 18 days of additional digestion and recovery period", posing multiple pressures on the DRAM and NAND supply chains. Analyst reports have previously warned that a long strike may not only cause direct losses of billions of dollars, but may also exacerbate global memory chip price fluctuations.
Against this background, Samsung executives are said to have fallen into "comprehensive panic" and began to seriously evaluate extreme solutions that were considered "impossible to use" in the past, including the disclosed DS division's overall spin-off. Logically speaking, once highly profitable semiconductor assets are divested into independent companies, the influence and negotiation space of the union, which is currently focused on the entire group as a unit, may be weakened. On the other hand, the spin-off semiconductor company may also be more independent in its salary and incentive structure, reducing horizontal comparisons with other business sectors.
However, the tug-of-war between supporters and opponents is still in its early stages. On the one hand, the management hopes to send the "spin-off" signal to convey to the union that it has cards to play, and warns that the escalation of the strike may trigger irreversible consequences of group restructuring; on the other hand, shareholders and some insiders are worried that once Samsung, the core structure of South Korea's representative chaebol, is actually broken up, it may trigger a series of chain reactions such as revaluation of the capital market, rewriting of the governance structure, and weakening of industrial coordination.
As of now, Samsung has not issued an official statement on the rumored spin-off of the DS division. But with only a few weeks left before the start date of the strike declared by the union, the rumor of the "nuclear option" itself has become the latest variable in this game around pay distribution and power.