Samsung Electronics faces significant near-term pressure on its earnings and stock performance, as escalating labor tensions, including a potential strike and substantial bonus provisions, threaten profitability, warns Citigroup.
In an April 30 report, Citi analyst Peter Lee reiterated a “buy” rating for Samsung stock but adjusted the target price down by 6.3 percent, moving from 320,000 won to 300,000 won.
This adjustment reflects growing concerns that Samsung may be compelled to allocate considerable provisions for performance-based bonuses, a direct consequence of intensifying labor disputes.
Lee estimates that incorporating these bonus provisions could lead to a 10 to 11 percent reduction in Samsung’s operating profit forecasts for both 2026 and 2027.
Despite these immediate risks, Citi maintains an optimistic outlook for the broader memory market cycle, aligning with general market consensus. Robust demand continues to surpass supply, evident as customers are already placing advance orders for future year shipments.
Furthermore, Samsung’s high-bandwidth memory (HBM) business is poised for strong growth, fueled by the escalating demand for artificial intelligence (AI) chips.
Nevertheless, Lee cautioned that near-term earnings visibility remains constrained, with labor risks emerging as a critical influencing factor.
The report further outlined additional potential headwinds, such as possible delays in achieving mass production approval for next-generation products like HBM4, intensifying pricing pressure due to aggressive competitor investments in both memory and foundry segments, and adverse earnings impacts from a potentially strengthening Korean won.
Samsung Electronics’ labor union is actively demanding the removal of existing caps on performance-based bonuses, advocating for payouts equivalent to 15 percent of the company’s operating profit, a figure estimated at approximately 45 trillion won.
The union has explicitly warned of initiating a full-scale strike from May 21 to June 7 should their demands remain unmet.
