Samsung Electronics and its labor union failed to reach an agreement during their final mediation talks on Tuesday, just one day before a planned strike, raising the likelihood of what could become the largest labor walkout in the company's history.
The two sides remained divided over key issues, including performance bonus payments and compensation for employees in loss-making business divisions.
In a statement released on May 20, Samsung Electronics expressed regret over the breakdown of negotiations and said it would continue efforts to prevent a strike.
“We deeply regret the conclusion of the post-mediation process without an agreement,” the company said. “We will continue dialogue until the very last moment to avoid the worst-case scenario.”
Samsung added that accepting the union’s demands in their current form could undermine the company’s core management principles.
“A strike should not occur under any circumstances,” the company said. “We were unable to reach an agreement because fully accepting the union’s demands could compromise the fundamental principles on which the company is managed.”
The central issue in the negotiations was the structure and scale of the Operational Profit Incentive (OPI), Samsung’s performance-based bonus system. While the company reportedly proposed expanding bonus payments and introducing certain improvements to the compensation framework, the union sought higher payouts for employees working in business divisions that recorded losses.
Samsung argued that it had already accepted most of the union’s proposals regarding bonus payments but could not agree to compensation levels that it viewed as excessive for unprofitable divisions.
A company official said Samsung’s position has been that bonuses should either be paid after a division returns to profitability or be capped at approximately 50% of annual salary for loss-making units.
“If the total bonus pool exceeds 10% of operating profit, some divisions could receive bonuses worth several hundred million won per employee,” the official said. “That would conflict with the principle of rewarding performance.”
Samsung emphasized that the dispute extends beyond wage negotiations and concerns the broader structure of corporate compensation.
“The principle that rewards should be linked to performance is fundamental,” the company said. “Abandoning that principle could have negative implications not only for Samsung Electronics but also for performance-based compensation systems across Korean industry.”
The union, however, has argued that employees’ contributions were not adequately reflected in compensation despite the recovery of the semiconductor market and improvements in corporate earnings. It has called for greater transparency in bonus calculations and reduced disparities in compensation among business divisions.
Industry observers generally believe the strike is unlikely to cause significant disruptions to semiconductor production in the near term. Nevertheless, concerns remain that prolonged labor disputes could become an additional burden for Samsung at a time when global competition in artificial intelligence (AI) semiconductors is intensifying.
Analysts note that internal conflicts could affect market confidence as Samsung focuses on strategic growth areas such as High Bandwidth Memory (HBM) chips and advanced foundry manufacturing.
Despite the failed talks, both sides have left open the possibility of further negotiations. Samsung said it remains willing to engage in additional mediation efforts or direct discussions with union representatives.
“We will continue working toward a resolution through further mediation or direct dialogue with the union,” the company said. “We also appreciate the government’s efforts and ask for its continued attention and support.”
An industry official said both sides have arguments that resonate to some extent.
“Samsung has reasons for defending its performance-based compensation principles, while the union’s call for improvements to the reward system is also understandable,” the official said. “Even if the strike goes ahead, the ultimate solution will likely come through renewed negotiations and a compromise between the two sides.”
