Samsung fires the first shot; South Korean chaebols are collectively losing their composure.
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Samsung’s chip workers have been waiting for this day for a long time.
On May 27, 48,000 Samsung employees voted to approve a compensation agreement—they will take 10.5% of the pre-tax operating profit from the Samsung semiconductor division as a special bonus. Some memory chip workers, including retrospective bonuses, will receive as much as $416,000. Last week, South Korean President Lee Jae-myung said in a cabinet meeting, stating clearly the nature of the matter: "Even investors can only get dividends from after-tax net profits, so how can workers put the money away before taxes?"
Even the president thinks workers are "jumping the queue." But Samsung had no choice and had to take this hit.
SK Hynix Opened the Gap First
The story starts with SK Hynix.
Over the past two years, HBM (high-bandwidth memory chips) became the rarest component in AI infrastructure. No matter how powerful Nvidia’s GPU is, it can’t run without HBM. SK Hynix has taken the largest share of this market, and Samsung has been playing catch-up. SK Hynix’s profits soared—with full-year operating profit in 2026 expected to reach 250 trillion won, about $170 billion. According to its rules, 10% of operating profit goes directly to employees. This year, each employee’s average bonus is expected to reach 600 million won, about $430,000, roughly 2,964% of their basic salary.
Samsung’s chip workers did the math and started to jump ship.
According to Samsung’s union, employees are leaving "in batches" for SK Hynix. It’s not just about money; the pay gap signals something clear: SK Hynix won this round of the AI memory competition and can offer such pay; Samsung fell behind in HBM and can’t. The loss of talent further drags Samsung’s technical catch-up speed, forming a vicious cycle.
By this year, the situation is unmanageable. 48,000 workers threatened to strike for 18 days. Samsung’s Q1 2026 DS division’s quarterly operating profit reached 53.7 trillion won, surpassing the total for all of 2025. It could afford the bonus, but not 18 days of shutdown.
So the agreement was signed. Samsung became the second major corporation in Korea to formally link a fixed percentage of operating profit to employee bonuses.
Jumping the queue before taxes: A global corporate governance precedent
What truly makes the business world uneasy about this agreement is not its amount, but the two words—pre-tax.
The usual logic is: The company makes money, pays taxes first, then from remaining net profit, some is retained, some given to shareholders. Employee bonuses are counted as a cost and deducted from income; that's different from profit distribution. Now, Samsung workers are getting a fixed proportion directly taken from operating profit (pre-tax). Their allocation order is after the tax authorities, before shareholders.
Kim Ki-chang, a South Korean university law professor, says this defies the "long-standing norms of global corporate governance". President Lee Jae-myung put it bluntly: Investors’ dividends come from after-tax net profits, so why do workers get paid before shareholders?
SK Hynix actually did the same thing earlier, but at the time didn’t cause such a stir. Samsung is different in scale—Samsung alone accounted for 22% of Korea's GDP in sales in 2010. What Samsung agrees to sets the industry standard in Korea.
The Korean Business Federation issued a statement, unusually tough: "Samsung’s special circumstances should not be generalized by labor groups and promoted throughout the industry." The statement itself shows the problem: They know it’s unstoppable, so they say "don’t copy".
Three variables aligned—the chaebols can’t stop it this time
For decades, Korea’s chaebol system has suppressed labor, relying on three things: Non-transparent profits (workers don’t know how much the company earns), weak unions (unionization rate only 13% in 2024), and little legal protection (high strike cost, companies can claim damages).
This year, all three have cracked at the same time.
Prosperity in AI chips has made Samsung and SK Hynix’s profits completely transparent—every quarterly report, the whole world knows how much the two firms earn. Workers have the numbers and leverage for demands. SK Hynix’s quarterly profits exceeded some full-year totals for Samsung; workers saying "I want 10%" leaves management with no “company has no money” excuse.
The Yellow Envelope Law came into effect in March, changing the power balance. This law expands the definition of "employer": As long as there is "substantial control" over workers’ labor conditions, even without direct employment, they can be required to negotiate. Within two days of the law’s implementation, 100,000 unionized subcontractors made collective bargaining demands to parent companies. It also made strikes related to mass layoffs and plant closures legally protected. The previous best trick for suppressing unions—"If you strike, I'll close the factory"—is now legally invalid.
SK Hynix is the third piece of the puzzle. It did the same as Samsung earlier but wasn't knocked down. Instead, it had higher profits, more talent, stronger stock performance. This broke the most important psychological line for the chaebols: “No one’s ever done this.” Now someone has, successfully, and the other unions see it.
Three variables aligned—it’s not coincidence; it’s structural.
Samsung’s 10.5% becomes everyone else's starting line
The ink was barely dry on the agreement before local unions started treating it as the baseline, not the ceiling.
Five Kakao subsidiaries’ unions joined together, demanding 13–15% of operating profits, higher than Samsung’s, or else threatening a collective strike, with the labor-management committee mediating. LG Uplus and HD Hyundai Heavy Industries are more direct, demanding 30%, nearly three times Samsung’s agreement. Samsung’s own biopharma division staff have been striking for five days, asking for 20%; management hasn't budged, employees refuse overtime and holiday shifts, entering a long-term battle.
All these following unions are not chip companies, do not have Samsung DS’s profit thickness, but their logic is: Since Samsung gave it, why shouldn't we get it?
The chaebols’ psychological defense shattered the moment Samsung signed.
More crucial change is at the legal level. The Yellow Envelope Law, effective this March, basically closed off the channel for companies to sue striking union for damages. Previously, the best tactic to suppress unions was "you strike, I sue you, bankrupt you"—some unions have been ordered to pay billions of won. Now this card is ineffective. If management keeps being tough, the cost is now "both sides pay", the chip comparison is different.
Within two days of the law taking effect, 100,000 unionized subcontractors across Korea submitted collective bargaining applications to parent companies. Workers have waited for this door for a long time; once it’s open, it can’t be closed.
Of course, this battle doesn't mean the chaebols are easily toppled. The opposition is not without substance: Samsung and SK Hynix’s concessions are based on the exceptional profits from AI; Kakao, LG Uplus, Hyundai Heavy Industries don’t have such thick profit base, and if they really negotiate, 30% may not be achievable. Samsung Biopharm management held out through five days of strike, showing not all chaebols will follow Samsung’s path.
Even if non-chip companies eventually get 10%, 15% instead of 30%, that would be unprecedented in decades of chaebol history. Unions demanding 30% but getting 15% is fundamentally different from getting nothing before.
The result of Kakao’s negotiations will be the first test of how far this story can go. If it ends with any form of profit-sharing agreement, the chaebols' “collective breakdown” is confirmed; if negotiations break down and strikes are suppressed, Samsung remains an isolated case, and the fire won’t spread for now.
Samsung’s stock rose, but the market missed the point
On the day the agreement took effect, Samsung Electronics’ stock rose 8.5%, a record high.
The market priced in the "clearing of strike risk"—the threat of 18 days of shutdown is gone, continuity of production restored, paired with Nvidia’s strong earnings and optimism about AI chip demand, Samsung had reason to rise.
But the long-term cost pressure of 10.5% has not been fully priced in.
In Q1 2026, Samsung DS division’s single-quarter operating profit was 53.7 trillion won; if it maintains this pace for the year, the bonus pool will approach 20 trillion won (about $14 billion). Some is paid out in treasury stock, reducing immediate cash pressure, but stock dilution is real; long-term erosion of EPS and ROE is unavoidable.
The real turning point is the second half profit guidance. If Samsung DS division's H2 profits stay high, the market will gradually absorb the cost pressure, with repricing focused on progress in HBM catch-up. If profit growth slows and bonus costs are added, medium-term pressure will be more obvious in valuations.
SK Hynix faces the same cost equation, but its HBM technology advantage brings stronger pricing power, and higher profits cover the rising costs—so far, it remains the stronger player in South Korea's chip sector.
Three things to watch next: The result of Kakao negotiations—the first validation for the domino effect; Samsung DS’ second half profit guidance—determining the real weight of the 10.5% cost; the direction of Samsung Biopharm strike—representing the speed of chaebol system loosening internally.
Samsung fired the first shot, the bullet is already out. Whether the South Korean chaebols can guard their wallets, we will have the answer in the coming weeks.
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