Samsung strikes are alarming the world economy

Samsung stops and calls an indefinite strike, with the world carefully watching developments that could compromise chip production.

In detail, the South Korean giant’s union, the largest nationally and boasting 30,000 members, declared on Wednesday that it will continue the indefinite strike, intensifying its campaign against the technology giant to obtain better salaries and benefits.

This is the largest organized industrial action in the fifty-year history of the South Korean conglomerate. It is not clear how many will respond in total to the union’s appeal, but the concern is that the action could escalate and damage the country’s best-known company, or trigger similar responses in a recovering and now crucial.

What’s happening at Samsung? The reasons for the indefinite strike

The requests to the management of the Samsung giant include a 3.5% increase in the base salary of members, greater transparency in salaries, and compensation for economic losses of members who participated in the strike.

“Management has no intention of engaging in dialogue”, the union said in a statement on its website. “We have clearly identified production disruptions in line and the company will regret this decision”, he said.

The union will first target a smaller manufacturing plant that relies more on workers, then target high-bandwidth memory production in Pyeongtaek. “In the end, the management will give in and sit at the negotiating table”, is the union’s motto.

Much of Samsung’s production is automated, but the company can’t afford any production hiccups in the coming weeks. The giant is trying to convince Nvidia Corp. to use its high-bandwidth memory, a prerequisite for catching up with smaller rival SK Hynix Inc. in the booming expanding artificial intelligence arena.

“Samsung will ensure that there are no disruptions in production lines ”, the company said, We remain committed to engaging in good faith negotiations with the union. The workers’ position, however, seems to be ironclad.

However, not everyone believes that hard punching can actually work. Lee Kyungmook, an economics professor at Seoul National University, said the union’s strike may not gain widespread support among workers because they have little incentive, as any disruption would directly impact their wages.

“If their company fails to make money because the production lines are not operational, the bonus amount will be significantly reduced. So the strike will not be able to gain momentum”, he added.

Is chip production at risk?

Samsung shares pared earlier gains, falling 0.3% in Seoul on Wednesday, while vendors including Wonik IPS Co., TES Co., and Soulbrain Holdings Co. lost ground.

The strike comes as the global semiconductor supply chain faces increasingly heightened technological rivalry between the United States and China and geopolitical challenges. Samsung represents approximately 20% of the global DRAM market and approximately 40% of NAND flash, used in smartphones and servers.

Investors remain largely unperturbed, analysts said. The market is focused on how quickly Samsung can get approval from Nvidia to supply HBM and has “little interest in the strike”, according to Lee Seung-woo, head of the research center at Eugene Investment & Securities. It’s also difficult to gauge what the impact on earnings will be, as a potential production disruption could drive chip prices higher, he said.

The workers’ demands follow Samsung’s posting of a 15-fold increase in operating profit in the June quarter, reflecting a rebound in demand for memory chips and a boom in investment in AI infrastructure. However, investors remain concerned about the company’s market position in AI chips compared to rival SK Hynix.

Meanwhile, workers are demanding higher wages. In the context of chip euphoria, the aspect of workers’ conditions should also be taken into account.

Original article published on Money.it Italy 2024-07-10 10:35:06. Original title: Perché lo sciopero Samsung allarma l’economia mondiale