Unconditional dialogue fails to break the deadlock: Samsung Electronics union persists in strike, stock price plunges nearly 10%.

Samsung Electronics' South Korean union said on Friday that despite the company's offer to unconditionally resume wage negotiations, the union still plans to strike as scheduled next week. This week, negotiations between the union and the company on wage and bonus plans broke down under government mediation, exacerbating concerns about a strike at the world's largest memory chip manufacturer. The union stated on Friday that it is willing to hold new negotiations after June 7, while still planning to strike starting from May 21 for a period of 18 days, which could disrupt the chip manufacturer's production. Analysts attribute the drop in stock prices to increasing uncertainties about the impact of the strike on production and concerns about Samsung's ability to fulfill commitments to customers. NH Investment & Securities senior analyst Yoo Yong-ho said, "If the strike occurs, people seem increasingly worried about delivery reliability and believe that competitors may benefit from this uncertainty." Mr. Yoo stated that the likelihood of a strike seems to be increasing as the company has not presented a new proposal to the union. As of the time of writing, Samsung Electronics stock has fallen by over 8%, while the South Korean composite stock index has dropped by over 6%. Trigger: "Bonus Gap" with SK Hynix The spark of this storm directly points to the deepest thorn in the hearts of Samsung workers - the so-called huge bonus gap with their rival chip manufacturer SK Hynix. The union is angry about this and has warned that over 50,000 workers may go on strike next week. This anger is not unfounded. Just weeks ago, Samsung Electronics' market value had just surpassed the trillion-dollar mark, while another South Korean memory chip giant SK Hynix was approaching this milestone with a market value of $93.86 billion. After achieving a staggering 274% increase in 2025, SK Hynix's stock price has since risen by over 200% in 2026. If SK Hynix and Samsung Electronics both enter the "trillion-dollar market value club," South Korea will become the first market outside the U.S. to have two trillion-dollar companies. However, at a time when SK Hynix's first-quarter net profit reached 40.33 trillion won, average DRAM prices soared by about 60%, and NAND prices skyrocketed by about 70%, Samsung workers only see the huge disparity in bonus treatment between themselves and their competitors. The union had previously stated that they would only sit down for negotiations if the company presented a detailed proposal to address the union's demands by 1 a.m. Greenwich Mean Time on Friday, but this deadline has passed and the company has not given a satisfactory response to the union. $20 billion gamble: JPMorgan's worst estimate The economic cost of the strike is being rapidly quantified. JPMorgan Chase stated in a report that the impact of the strike on production may be greater than previously expected, reflecting the union's expectation of more workers participating. JPMorgan estimated that Samsung's operating profit could be affected by 21 trillion to 31 trillion won (approximately $14.08 billion to $20.79 billion), with sales losses potentially amounting to about 4.5 trillion won. According to estimates by the Samsung Electronics union, an 18-day strike could result in total losses of up to 30 trillion won. This figure comprises two parts: 18 trillion won in expected operating profit loss and an additional 12 trillion won in extra losses required for the production line to return to normal after the strike. The Korea Labor Committee has also urged both parties to hold another round of government-mediated negotiations on Saturday to avoid the strike. Samsung Electronics confirmed in a statement its proposal for unconditional negotiations, but did not immediately offer further comments. Burning $29 million per hour: Why semiconductor production stoppage is 12.6 times that of the automotive industry Behind the numbers lies the harsh logic unique to the semiconductor industry. According to data from Siemens and Aberdeen Research, if a production stoppage occurs due to a strike, power outage, etc., the average hourly losses for the automotive industry are $2.3 million, heavy industry is $300,000, and consumer goods industry is only $36,000. In contrast, the potential losses from a Samsung Electronics strike could reach $29 million per hour, which is 12.6 times that of the automotive industry. This significant difference stems from the characteristics of semiconductor manufacturing processes. After a car production line stops, it can be restarted immediately once the strike ends, but semiconductor lines must run continuously 24 hours a day. If they stop, losses could amount to trillions of won. Once a wafer enters the process, it undergoes a series of complex steps such as etching, coating, circuit writing, etc. If the process is interrupted, all wafers on the line must be scrapped. A wafer can produce around 1800 DRAM chips, with each chip selling for $3300 to $3500. Production line stoppage means that wafers, which take 3 to 4 months in the normal DRAM process and 7 months in the HBM process, will all turn into waste. Even more challenging is that if routine maintenance of semiconductor equipment is suspended for an extended period, it may take twice as long to resume normal operations. Kim Dong-won, head of the research department at KB Securities, predicted that in the worst-case scenario, even if the strike ends, it could take 2 to 3 weeks for automated production lines to fully recover and operate normally. This means that if the union does go ahead with an 18-day strike, Samsung Electronics may take up to 36 days, over a month, to fully restore normal production capacity. In fact, the strike involving around 40,000 employees on April 23 provided a cautionary tale: storage wafer capacity decreased by 18.4%, while contract wafer capacity plummeted by 58.1%. Even with highly automated storage lines, the absence of 40,000 people still resulted in nearly a fifth of the capacity loss, while labor-intensive contract lines suffered a direct drop of nearly 60%. Storage super cycle: The era of "zero capacity" under AI frenzy The reason why this strike is causing such panic in the market is due to the fact that it is happening during the most frenzied period of the global memory chip market's "super supply shortage cycle." With the strong demand for data center construction by large tech companies leading to limited supply of memory chips and driving up prices for high-end and regular memory chips, both Samsung Electronics and SK Hynix have benefited from this sustained growth momentum. Goldman Sachs recently raised its price increase forecasts for DRAM memory chips from about 150% to 250%-280%, and NAND price increase forecasts from about 100% to 200%-250%. Goldman Sachs believes that this is not a normal inventory replenishment cycle, but rather a "super supply shortage cycle" caused by unprecedented surge in demand driven by AI computing power, extremely complex manufacturing and packaging processes of HBM occupying capacity, and insufficient elasticity in general DRAM/NAND supply. Whether it's Google's vast TPU AI computing cluster or NVIDIA's massive AI GPU computing cluster, both rely on HBM storage systems integrated with AI chips, and tech giants accelerating the construction or expansion of AI data centers must also purchase server-level DDR5 memory and high-performance SSDs for enterprise-grade servers. Samsung Electronics' first-quarter financial report shows that the company achieved revenues of 133.9 trillion won, a 69% year-on-year increase and a 43% increase from the previous quarter, with memory chip revenue reaching 74.8 trillion won, a 101.62% increase from the previous quarter. The semiconductor division's revenue accounted for over 50% of the group's total revenue for the first time. Operating profit is also remarkable, with the company achieving 57.2 trillion won in the first quarter, a 184.6% increase from the previous quarter and a 756% increase year-on-year. In this context, JPMorgan estimates that the strike could reduce Samsung Electronics' annual DRAM and NAND flash production by 0.5% to 0.9%. A semiconductor industry insider pointed out that the DRAM market is already experiencing shortages, with orders for 10 chips only resulting in the delivery of 6 chips, and a 0.9% reduction in production is enough to trigger market fears. KB Securities also predicts that if all production lines stop for 18 days, global memory chip supply could decrease by 3%-4% for DRAM and 2%-3% for NAND, with the impact equivalent to wiping out the entire production capacity of the world's fifth-largest DRAM manufacturer, Micron Technology (with a global market share of around 2%). Customers are eager to send money, SK Hynix emerges as the biggest potential winner To what extent is the shortage of production capacity? Global tech giants are vying to extend an "olive branch" to SK Hynix, proposing investments to build new production facilities and providing funding for expensive production equipment procurement, all to secure memory chip supplies ahead of others. According to sources, SK Hynix's customers have offered various collaboration proposals, including investing in dedicated memory production lines, with some clients even financing the purchase of ASML's extreme ultraviolet lithography machines for SK Hynix, with each machine priced at hundreds of millions of dollars. The insider bluntly stated: "No matter what proposals customers put forward, the available capacity is virtually zero at the moment. Not even a small fraction of capacity can be allocated to specific customers." SK Hynix is cautious about customer investments, as such deals could potentially make them dependent on specific buyers, and they may be required to supply chips at lower prices. The influx of investment proposals from tech giants towards SK Hynix in this industry is rare and unprecedented. The industry has historically shown extreme cycles of boom and bust, but chip manufacturers believe that this current upturn in the industry may last longer. As warned by NH Investment & Securities analyst Yoo Yong-ho, competitors may benefit from this uncertainty - on the same day Samsung workers take to the streets, SK Hynix's customers are lining up to send money and equipment. Distrust collapse: The long-term cost scarier than production losses However, the real impact of the strike may not lie in the direct losses of 30 trillion won, but in the potential to shake Samsung's most core asset - customer trust. Recently, due to continued DRAM shortages, U.S. computer manufacturers such as Dell and HP have started verifying products from China's Yangtze Memory. If Samsung's memory chip supply is reduced, customers may turn to Chinese suppliers. Some have pointed out that in the foundry business where trust is paramount, the impact of a strike may be more profound. Samsung had positioned itself in the custom HBM market with a core competitive edge of "one-stop service" from chip to packaging, but the supply risk brought by the strike will make it harder for them to win customers. Once customers are lost, due to the high costs of switching logistics and design schemes, they are unlikely to return. Seoul National University professor Song Heon-ui warned that this strike could solidify into permanent losses, weakening the country's potential growth engine. South Korea Government's emergency response The shockwaves of the strike have spread from the corporate level to the national level. Given that semiconductors account for 37.1% of South Korea's total exports in April and 55% of the GDP growth increment in the first quarter, this strike is seen as a significant risk to South Korea's economic growth, exports, and financial markets. South Korea's Deputy Prime Minister and Minister of Economy and Finance, Joo Hoon Cheol, stated on Thursday that the threat of a strike by Samsung Electronics' union is a significant risk to the South Korean economy and should be avoided at all costs. South Korea's Minister of Trade, Industry, and Energy, Kim Jung-kwan, stated that the strike will cause irreparable damage to the economy, and emergency arbitration may be inevitable. Under South Korean law, only the Minister of Labor has the power to use emergency arbitration, and Labor Minister Kim Young-hun has emphasized the necessity of dialogue between companies and unions. Investor enthusiasm for chip stocks is also driving South Korea's stock market to "shine again" this year, with the country's benchmark index, the KOSPI index, rising by 75% in 2025, marking its best annual performance since 1999. Year-to-date, the index has surged by over 86% and hit a historical high. Sydney IG market analyst Fabien Yip said, "The market is being driven by FOMO (fear of missing out) sentiment, especially in AI-related stocks in Japan and South Korea." The news of Samsung's strike is undoubtedly the most alarming alarm in this frenzy. In the age where computing power equals productivity, with Samsung Electronics and SK Hynix reaching near trillion-dollar market values, South Korea is standing at an unprecedented peak of glory. However, as 50,000 workers prepare to walk out of the factory gates, the very foundation of this trillion-dollar club is shaking violently. For each hour the strike continues, $29 million is lost; each additional day results in a loss of customer trust. In this "hard-to-come-by" super cycle of memory chips, Samsung is facing not just a labor dispute, but a life-or-death test for the nation's economic lifeline and global AI supply chain discourse. And at the other end of Seoul, in SK Hynix's factories, customers are lining up, ready to send in money and equipment.