Samsung Electronics is facing its largest strike in company history, and the root cause reveals a fundamental problem with how the semiconductor giant is organized. Internal wage negotiation transcripts show the company offered memory chip workers bonuses worth 607% of annual salary, while foundry and logic chip workers received between 50% and 100%. This massive disparity reflects a deeper issue: Samsung houses wildly unequal businesses under one division, creating internal conflicts that threaten the company's long-term ambitions.

Why Is Samsung's Memory Division Getting Such Massive Bonuses?

Samsung's memory chip business is printing money. The division is riding a wave of artificial intelligence demand, particularly for high-bandwidth memory (HBM) chips that power data centers and AI systems. The company succeeded in beginning mass production shipments of HBM4 in February and plans to introduce HBM4E products this year, along with customized HBM products next year. This success stands in sharp contrast to the company's other semiconductor businesses.

The Device Solutions division houses three businesses: memory, System LSI (logic chips), and foundry services. Memory is thriving, but the other two have posted combined operating losses running into the trillions of Korean won. Samsung's negotiators argued that the bonus disparity reflects this reality. Without memory's profits, the logic chip divisions would have collapsed or shut down, according to internal meeting transcripts.

The numbers tell the story. Samsung's research and development spending on semiconductors jumped from 20.2 trillion won (approximately $14.7 billion) in 2019 to 37.8 trillion won (approximately $27.5 billion) last year. Total spending on research and facility investment this year is expected to reach 110 trillion won (approximately $80.1 billion), including 11.3 trillion won (approximately $8.2 billion) invested during the first quarter alone.

What's Driving the Labor Dispute and Why Should You Care?

The union rejects Samsung's reasoning. Union chairman Choi Seung-ho argued that a worker in the memory division receiving 500 million won in bonuses while a foundry colleague takes home 80 million won creates a retention crisis the company cannot afford. Reuters spoke with workers who described shrinking teams in Samsung's foundry operations at Pyeongtaek, with engineers departing for both SK hynix and Micron. Roughly 200 Samsung employees moved to SK hynix over four months alone.

The union is demanding a structure similar to what SK hynix agreed to last September: 15% of operating profit allocated to a bonus pool, removal of the existing 50% cap on payouts, and formalization in employment contracts. SK hynix's deal translates to average per-worker bonuses approaching $477,000 this year, with projections nearly doubling in 2027.

This matters because Samsung is the only major semiconductor company that designs logic chips, manufactures them on a contract basis, and produces its own memory. That integrated model underpins a long-standing ambition to challenge Taiwan Semiconductor Manufacturing Company (TSMC) in contract chipmaking by 2030, backed by more than $116 billion in planned investment. But the bonus disparity exposed in the transcripts highlights a huge problem with housing wildly unequal businesses under one compensation framework.

How Samsung's Organizational Structure Is Undermining Its Foundry Ambitions

• Structural Imbalance: Memory accounts for only about 30% of the global semiconductor market, while system semiconductors make up the remaining 70%. Samsung is under pressure to expand its presence in system large-scale integration chips and foundry services, which require sustained long-term investment.
• Talent Drain: The bonus disparity is causing experienced engineers to leave Samsung's foundry division for competitors like SK hynix and Micron, weakening the company's ability to compete with TSMC in contract manufacturing.
• Financial Impact: JPMorgan Chase warned that accepting the union's demands could reduce Samsung's annual operating profit by as much as 12%. Citigroup lowered its target price for Samsung shares from 320,000 won (approximately $233) to 300,000 won (approximately $219), citing risks tied to labor-management tensions.

Yonsei University professor Namuh Rhee argues that the conflict is partly a consequence of Samsung's own organizational design. Combining profitable memory with loss-making foundry operations under a single division creates internal conflicts of interest and depresses the company's stock valuation.

The April one-day walkout provided a preview of what a full stoppage could look like: memory fab output fell 18% on the affected shift, and contract foundry production dropped 58%. Samsung has already begun winding down chip production in anticipation of the strike going ahead.

Samsung's leadership has acknowledged the severity of the situation. Chairman Jay Y. Lee issued a rare public apology on Saturday, cutting short an overseas trip to address the dispute in person. The company has also replaced its chief bargaining representative, reportedly at the union's insistence.

The broader context matters here. While Samsung's memory division is rebounding after the company scaled back HBM research and development in 2019 during a market downturn, that decision proved costly. The rise of generative artificial intelligence applications sharply increased global demand for advanced memory chips, forcing Samsung to accelerate its HBM strategy after Vice Chairman Jun Young-hyun took charge of the semiconductor business in 2024. Now, as memory profits surge, the company faces a critical test: whether it can retain the talent and investment focus needed to build a competitive foundry business while keeping its memory division satisfied.