Samsung’s Corporate Culture

The strike hit Samsung at a critical time, amid signs of a turnaround after several years of shrinking sales and revenue. In April, Samsung’s first-quarter operating profit was 6.61 trillion won, up a whopping 932.8 percent compared with the previous year’s first quarter, when the figure fell to a fourteen-year low.

The latest quarterly results still camouflaged Samsung’s ongoing failure to wean itself off overdependence on traditional memory chips, which are known for drastic price fluctuations, and a smartphone market that is increasingly in the doldrums. The rosy perspective became possible thanks to the global AI boom, which has finally begun to boost not only HBMs, the key component for AI chipsets, but also Samsung’s established NAND and DRAM chips.

Yet as recently as May, Samsung’s HBM chips had yet to pass the test for use in AI chipsets by Nvidia, the US chip designer driving the global AI boom. This amplified fears that the chipmaker, which has historically been the biggest contributor to corporate tax revenue in South Korea, will be left out of a rapidly expanding AI market.

In April, Samsung’s flagship smartphone, Galaxy, replaced Apple’s iPhone as the world’s bestseller. This was not because Samsung technologically trumped Apple, but rather because of opportunities for expansion in China. Political tensions with Washington enabled local upmarket brands to aggressively chip away at the territory of their US rival in the Chinese market.

This is not the first time South Korea’s largest company has found itself needing to stay in tune with a fast-changing and highly competitive global tech scene. In the late 1980s, Samsung embarked on an ambitious shift to establish itself as a global brand rather than an imitator of Japanese firms like Sony and Toshiba that dominated consumer electronics at the time. Since then, it has consistently managed to outrun competitors by heavily wagering on new niches with massive investments and vast human resources.

While the South Korean government always shouldered financial risks with tax credits and cheap direct loans, Samsung has gorged on the country’s top talent across the board from R&D to the shop floor. The company made them the best-paid workers with the most generous benefits and perks in the country. An average Samsung Electronics employee earns more than 120 million won ($87,000) a year, compared with the country’s per capita GDP of $32,000.

In a rarity for South Korea in the 1990s, both executive and nonexecutive compensation was tied to a simple, straightforward profit-sharing scheme. This incentivized employees based on a combination of individual and corporate performance targets.

These incentives drove workers to work harder and longer, often at the expense of personal sacrifices. Samsung was proud of this work culture. In 1991, the conglomerate placed an ad in all major publications, titled “A Coffee Break at 3:00 AM,” about researchers working into the dawn to develop a new memory chip.

In 2012, during a patent lawsuit filed by Apple against Samsung over the Galaxy phone, the outside world could catch a glimpse into the grinding reality of work at Samsung. Designer Wang Jeeyuen said she had slept two to three hours a night and stopped breastfeeding to keep up with the schedule designing icons for the smartphone screen. Wang went on to say she had worked as hard as any Apple designer, although the core issue was whether she was creative enough not to have needed to steal ideas from Apple.

Work and Pay

The 3:00 AM ad and Wang’s testimony showcased three decades of ruthless effort that transformed Samsung into the only tech powerhouse simultaneously dominating the global memory chip and smartphone markets. The process was sustained by the trust of its employees in the tradeoff between hard work and correspondingly high pay.

The NSEU now calls for a 3.5 percent hike in wages, down a little from their earlier demand, and an improvement in holiday pay. However, the real point of contention is the metric for incentive pay, known as EVA (economic value added), which accounts for between 30 and 50 percent of total compensation.

EVA is after-tax operating profit minus capital costs, with calculation formulas that vary depending on firms and industry. In other words, an EVA-adjusted incentive pool will decrease when a firm invests or borrows heavily. This shrinks incentive pay for individuals, often regardless of employee performance, with workers effectively made to defray a portion of investment costs such as loans and stock dividends. This is why EVA is rarely applied to nonexecutive renumeration — not even in the United States, which is home to all sorts of financially engineered gambits.

Worse, Samsung’s formula for EVA remains confidential, clouding the clarity of the metric. For 2023, with Samsung’s memory chip line running in the red, many Samsung employees saw their compensation drop while executives still took home bigger paychecks. CEO Han Jong-hee received 6.9 billion won ($5.2 million) in total compensation, up about 49 percent over the previous year, with no rationale for the increase explained.

The NSEU is demanding the replacement of EVA with operating profit as a more transparent metric for incentive pay. They believe the use of EVA will continuously bring their pay under the gun and widen the disparity between executive and nonexecutive compensation at a time when Samsung is aggressively spending to outcompete TSMC and others in AI-specific chips and chip foundry, or customer-tailored chip making. For the first three months of 2024 alone, the tech giant poured 11.3 trillion won ($8.12 billion), including 9.7 trillion won ($7.05 billion) for device solutions, or semiconductors, into capital expenditures.

Only four years ago, in 2020, Samsung formally ended a long-standing no-union policy, which it has enforced through surveillance and intimidation. This was a setback for the new chairman, Lee Jae-yong. The third-generation scion of the conglomerate’s founding family was under pressure at the time as he faced a prison sentence over a case of political corruption.

Lee had taken the helm of the conglomerate by bribing then president Park Geun-hye and her shamanist entourage. They in turn pressured the National Pension Service to use shareholder votes to support Lee’s rise. His malfeasance was the direct reason for Park’s impeachment in 2017, after months of mass protests, now dubbed “the Candlelight Revolution.”

Lee himself received an initial sentence of five years, which was reduced and suspended on appeal. After a higher court ordered a retrial, he received a sentence of two and a half years in 2021. In 2022, the conservative government pardoned Lee in what it presented as a bid to “enliven the economy by allowing him greater freedom to run Samsung.”

In 2018, the government’s broad-ranging investigation into Lee’s bribery turned up about six thousand confidential documents confirming long-held suspicions that the conglomerate has been orchestrating union-busting campaigns and the suppression of labor activity across its affiliates and contractors. Some documents revealed that Samsung had hired “angel agents” since 2012 at least to put union-organizing workers and outside activists under surveillance.

Some of these records led to the indictment of thirty-two executives for quashing a unionization effort at its outsourcing network of after-sale repair services from 2013 to 2016. During these years, much of which coincided with the period in which Lee was ingratiating himself with corrupt politicians to bolster his control of the conglomerate, Samsung’s brutal union busting, coupled with harsh working conditions, caused at least two workers to die on the job and another to end his own life in protest.

Blood Disorders

Nothing better illustrates how a workplace without collective labor representation can wreak havoc on even better-paid workers than the cluster of blood disorders among workers at Samsung. This tragedy likely began in silence during the late 1990s when Samsung churned out memory chips, riding high on the waves of the worldwide personal computer and Internet booms.

The blood disorder phenomenon came into public view in 2007, largely thanks to Hwang Sang-ki, a small-town taxi driver who lost his twenty-three-year-old daughter, Yumi, a worker at Samsung’s memory chip factory, to leukemia. After her diagnosis, the otherwise healthy daughter, with no family history of any such disorder, remained bedridden for two years.

She had only worked at Samsung for twenty months after graduating from high school. In the same year, after learning two other coworkers of his daughter had died of the same condition, Hwang and a handful of labor and public-health activists formed an advocacy group targeting Samsung known as Sharps.

As a volunteer, I updated the advocacy group’s English-language blogs in the period from 2012 to 2020. By the time I posted my first entry, the group had already identified the deaths of about a hundred Samsung workers as being occupationally caused. By the time of my last posting, the number had nearly doubled.

Former and current Samsung chip workers continued to die or become permanently infirm, while Samsung denied any wrongdoing or negligence. The compensation agency that was supposed to protect workers’ interests brought in Samsung’s own lawyers to deny the petitions of the victims.

For me, writing about Samsung at that time meant composing endless obituaries for these young female workers. The pattern of their sicknesses and deaths was almost self-evident. Samsung whisked busloads of the best talent from girls’ high schools in small towns to its ever-expanding factories where they turned out memory chips or LCD panels with little protective gear or safety training.

These girls were the pride of their families for landing a job that could help them save enough to pay for their own college education and that of their siblings, as well as showering their families with Samsung gadgets they could buy at an employee discount. This was before they fell victim to a variety of incurable blood disorders before they reached their mid-twenties. Now, Samsung regularly conducts a similar mass recruitment drive in Vietnam where it assembles most of its Galaxy smartphones.

It took four years for Sharps and Hwang to win a 2011 court ruling in favor of his daughter’s posthumous petition for compensation. This was the first public admission that a blood disorder was linked to conditions in the workplace. It was only after a sit-in by Hwang and the group at Samsung’s corporate headquarters, lasting more than a thousand days, that Samsung finally caved in and offered a formal apology and compensation to hundreds of victims.

Samsung’s brutal anti-labor history and the sacrifices of many of its workers should shatter the myth that good benefits and pay alone can substitute for labor’s own collective bargaining power. If there had been a union, Yumi and her coworkers would likely have graduated from college and gone about their lives. The impact of the current open-ended strike will surely continue to reverberate regardless of the outcome because it was sparked by the realization that even the best-paid workers cannot always rely on the benevolence of their employer.