Quick overview

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Recent underperformance of Samsung shares relative to SK Hynix may intensify as South Korea’s most valuable company faces off against its rival chipmaker amid an impending workers’ strike.  Samsung’s stock rose as much as 4.8 percent to a record high on Monday, part of a global surge fueled by ongoing investor optimism about artificial intelligence.

That is insignificant compared to SK Hynix’s 12% rise.  The two memory chip manufacturers’ performances diverged, with Samsung trailing its competitor by over 25 percentage points. The Samsung labor union threatened an 18-day strike beginning on May 21 and held a demonstration on April 23 to demand a larger share of AI-generated profits.

More analysts are voicing concerns about Samsung’s earnings prospects amid conflict between the company’s management and employees, particularly in light of SK Hynix’s historic agreement to increase bonus payouts last year. Samsung’s attempts to turn things around after lagging behind SK are hampered by the labor dispute

Stanley Tang, a senior portfolio manager at Sumitomo Mitsui DS Asset Management, stated, “People are still bullish on AI-driven demand of high-bandwidth memory, but are concerned about the potential strike in Samsung.” with stock in MediaTek Inc. of Taiwan. And ASE Technology Holding both increased by almost 10%, he claimed, “it is just Samsung lagging.”

With the threat of an 18-day walkout, Samsung’s labor union demanded that employees in the chip division receive 15% of operating profit. It had turned down the management’s previous proposal, which called for raising wages by 6.2% and allocating 10% of operating profit to bonuses.

Samsung’s chief financial officer, Park Sooncheol, stated that the company “is addressing management-labor issues in accordance with laws and procedures and will continue to prioritize dialogue with the union to reach an amicable resolution.”

Even in the event of a strike, the company intends to minimize potential production disruptions within the legal framework by responding with dedicated teams and a response system.

Samsung’s semiconductor division recorded a historic profit over the March quarter, surpassing expectations with a 48-fold increase.

As AI data center orders delivered substantial margins.  SK Hynix struck a deal with its labor union to donate 10% of its yearly operating profit to a bonus pool in an effort to ease labor tensions within the company. This agreement prevented a strike and may set a precedent for Korea’s tech sector.