Production stoppage for 1 hour would result in a loss of 29 million US dollars, which is 12.6 times the size of the automotive industry! The South Korean finance minister issues an urgent warning: the Samsung strike could severely impact the country's economic growth.

Samsung Electronics (SSNLF.US) union threatens to launch a large-scale strike, and the South Korean Finance Minister warns that this will pose a major risk to the country's economic growth, exports, and market. Market analysis also points out that due to the unique nature of semiconductor processes, the economic losses caused by this strike could be 12.6 times that of the automobile industry, and could potentially shake Samsung's most core asset - customer trust. South Korea's Deputy Prime Minister and Minister of Finance and Planning, Joo Hyun-han, stated on Thursday that the strike threatened by Samsung Electronics' union is a significant risk to the South Korean economy. Earlier, the chip giant and its union failed to reach an agreement on wages during Wednesday's negotiations, and union workers plan to go on an 18-day strike starting from May 21. If the strike were to proceed, it would be the first time in Samsung Electronics' history, and even in the global semiconductor industry, that a strike would have a direct impact on production and market. Unlike the 25-day strike involving around 5,000 people in July 2024, this time the union expects the number of participants to exceed 40,000, with the union chairman Choi Seong-ho even suggesting it could exceed 50,000 people, accounting for 64% of Samsung Electronics' total semiconductor department employees (approximately 78,000 people). Given that semiconductors are the lifeline of the South Korean economy - accounting for 37.1% of total exports in April and 55% of GDP growth in the first quarter - the shock waves of this strike could affect the overall national economy of South Korea and severely disrupt the global semiconductor supply chain. Semiconductor production losses are 12.6 times that of the automotive industry According to estimates by the Samsung Electronics union, the 18-day strike could result in losses of up to 30 trillion Korean won. This number consists of two parts: an expected operating profit loss of 18 trillion Korean won, and an additional 12 trillion Korean won required to restore normal production after the strike. This loss far exceeds that of other manufacturing industries. According to data from Siemens and Aberdeen Research, in the event of a shutdown due to a strike, power outage, etc., the automotive industry loses an average of $2.3 million per hour, heavy industry $300,000, and consumer goods industry only $36,000. In comparison, the losses caused by the Samsung Electronics strike are as high as $29 million per hour, which is 12.6 times that of the automotive industry. The huge difference stems from the nature of semiconductor processes. After a halt in automotive production lines, they can be immediately restarted once the strike ends. However, semiconductor production lines must run uninterrupted 24 hours a day, and any halt results in losses in the trillions of Korean won. When a wafer enters the process, it goes through a series of complex steps such as etching, coating, circuit writing, etc. If the process is interrupted, all wafers online must be scrapped. A wafer can produce approximately 1,800 DRAM chips, each of which sells for $3,300 to $3,500. A production line shutdown means that wafers in the normal DRAM process for 3 to 4 months and the HBM process for 7 months are all turned into waste. Supply chain panic and trust crisis The recovery of production lines after the strike could also be prolonged. Hundreds of precision equipment that operate at the nanometer level need to be recalibrated one by one, defective wafers need to be scrapped, and it takes days to bring the yield back to the target level. Kim Dong-won, head of the research department at KB Securities, estimates that in the worst-case scenario, even if the strike ends, it could take 2 to 3 weeks for the automated production lines to fully recover and operate normally. JPMorgan estimates that the strike could reduce Samsung Electronics' annual DRAM and NAND flash memory output by 0.5% to 0.9%. A semiconductor industry insider pointed out that the current DRAM market is already facing a supply shortage, with only receiving 6 out of 10 chips for orders placed, a production decrease of 0.9% is enough to trigger market panic. KB Securities also predicts that if all production lines were shut down for 18 days, global storage chip supply could decrease by 3% to 4% for DRAM and 2% to 3% for NAND, with the impact equivalent to wiping out the entire production capacity of the world's fifth largest DRAM manufacturer, SK Hynix (with a global market share of about 2%). The greater long-term risk is that the strike could erode the long-standing customer trust that Samsung has built up. Recently, due to the continuous shortage of DRAM, U.S. computer manufacturers like Dell Technologies, Inc. and HP Inc. have begun validating products from Chinese suppliers. If the supply of Samsung memory chips decreases, customers may turn to Chinese suppliers. Some have pointed out that in the semiconductor industry, where trust is paramount, the impact of the strike will be more profound. Samsung has been competitive in the custom HBM market, offering a "one-stop service" system from bottom chip to packaging as its core competence. However, the supply risks brought about by the strike may make it more difficult for them to win over customers. And once customers are lost, due to the high cost of switching logistics and design schemes, they are unlikely to return. Seoul National University professor Song Heon-ui cautioned that this strike could solidify into a permanent loss, weakening the country's potential for growth in the future.