Samsung Electronics pares $66 billion rout as Seoul moves to calm strike fears

Samsung Electronics, South Korea's leading tech giant, experienced a staggering market value drop of approximately 99.07 trillion won (around $66.18 billion) on Wednesday. This decline came after the company and its workers' union failed to come to terms over wage negotiations, resulting in a significant intraday share price dip of 6.09% from the previous day's closing value of 279,000 won. The labor union has announced plans for an 18-day strike starting May 21 if their demands are not met, with over 41,000 workers expected to participate. Union representative Choi Seung-ho voiced disappointment over the lack of response to their key demands, particularly regarding Samsung's performance-based bonus system. The union is advocating for a substantial 15% allocation of Samsung’s operating profit for performance bonuses, the removal of limits on bonus payouts, and a formalized bonus structure. In contrast, Samsung's management has proposed a 10% allocation of operating profit for bonuses along with a one-time special compensation package, as reported by Yonhap. The impact of the proposed strike has already been felt, with the April 23 rally reportedly leading to a 58% decrease in foundry production and an 18% drop in memory production for Samsung on that day. The union estimates that an 18-day strike could cost the company around 30 trillion won, or about $20 billion. In response to the escalating situation, South Korea's Finance Minister Koo Yun Cheol expressed regret over the lack of resolution and emphasized the importance of avoiding strikes, noting that Samsung Electronics is a company of global significance. He urged both labor and management to engage in principled negotiations, highlighting the broader impact of the situation on the national economy. Following these remarks, Samsung's shares began to recover, buoyed by the government’s commitment to closely monitor the situation and provide support to prevent the strike. Meanwhile, Samsung reported a staggering eightfold increase in its first-quarter operating profits, largely driven by robust growth in its chip business, amounting to 57.2 trillion won—a remarkable 750% rise compared to the same period last year.