Samsung Electronics’ labour union said on Wednesday that it will launch a general strike on Thursday as scheduled following the breakdown of the performance bonus negotiations.

The talks between Samsung management and its labour union, mediated by the National Labour Relations Commission, failed to reach an agreement despite the post-mediation process where the commission stepped in to resolve the deadlock between the two sides after the breakdown of standard negotiations.

The commission explained that the labour side accepted the mediation proposal while the management reserved its decision, saying it would initiate mediation at any time if both management and labour agreed to request it. The labour union noted that it will lawfully proceed with the general strike as planned, though it will continue efforts to reach a settlement even during the strike period.

Samsung emphasised that under no circumstances should a strike occur, saying that it will not give up on dialogue until the last moment to prevent the worst-case scenario.

The dispute stemmed from differences over the performance bonus system for employees in deficit-making business divisions. The labour union demanded a higher base pay-out for all workers, including those in deficit-making units such as the system LSI and the foundry divisions, but the management adhered to its policy of “no bonus without performance.”

Samsung stressed that if it accepts the union’s excessive demands, it could shake the basic principles of management and negatively affect other companies and industries.

Up to 50,000 union members, about two-thirds of Samsung’s semiconductor workforce, were expected to participate in the strike scheduled to last for 18 days from May 21 to June 7.

Short-term damage from the strike could be limited given the highly automated chip production, but a prolonged strike could disrupt the global supply of high bandwidth memory (HBM) and server DRAM chips used for artificial intelligence (AI) infrastructure.

The presidential Blue House expressed deep regret over the failed labour-union negotiations, asking both labour and management to do their utmost to reach an agreement until the very last moment, considering the concerns about the impact on the South Korean economy. 

The government was mulling the invocation of emergency mediation power, a special government power to forcibly stop a strike for 30 days and resolve the dispute when an essential industry, such as semiconductors, is at risk.

South Korean President Lee Jae Myung stated that basic labour rights can be legally restricted for public welfare. Prime Minister Kim Min-seok said in a national address on Sunday that Samsung’s strike could cause up to 100 trillion won ($66.2 billion) in direct and indirect losses and create a domino effect in over 1,700 subcontractors.

• A Tell Media / Xinhua report