Samsung AI Boom: Bonus Split Divides Chip Unit

For years, Samsung Electronics has championed an integrated vision for the burgeoning AI chip market, offering customers a comprehensive solution spanning memory, logic design, foundry manufacturing, and advanced research – all under one roof to secure critical artificial intelligence components.

Internally, however, translating this unified promise into equitable compensation has proven challenging. The recent mediation, which ultimately collapsed on Wednesday, was not merely about a bonus figure. Instead, the dispute centered on the distribution of substantial profits generated by the AI memory boom within Samsung’s expansive Device Solutions (DS) division.

The DS division encompasses crucial segments: Memory, the powerhouse behind DRAM, NAND, and high-bandwidth memory (HBM) profits; Foundry, its dedicated contract chipmaking operation; and System LSI, its logic-chip design subsidiary. While Samsung does not publicly disclose individual DS unit earnings, Foundry and System LSI have traditionally been perceived as struggling to turn a profit.

Samsung management declined to endorse a mediation proposal accepted by the union, asserting that the demands would disproportionately reward these loss-making units, thereby contradicting its fundamental principle of “reward follows performance.” In response, the union confirmed its intent to commence a planned strike on Thursday.

Employees advocating for a wider profit-sharing model view the conflict through a different lens. They contend that Samsung cannot market itself as a seamlessly integrated chip manufacturer externally, only to then structure internal compensation as if advanced semiconductor innovations arise in isolated business silos.

At the core of the impasse was a crucial ratio concerning the distribution of a special bonus pool within the Device Solutions (DS) division.

The union proposed a 70:30 split, advocating for 70 percent of the pool to be shared broadly across the entire DS division, with the remaining 30 percent allocated based on individual business unit performance. Initially, Samsung was reportedly in favor of a 40:60 split, emphasizing greater rewards for specific unit results. By the final stages of mediation, Samsung’s stance had shifted closer to a 60:40 ratio, though still falling short of an agreement.

This slight concession failed to bridge the divide. A larger common bonus pool would grant Foundry, System LSI, and shared research departments a more substantial share of profits predominantly recorded by the Memory unit. Conversely, a larger business-unit-specific pool would ensure that the primary profit-generating unit retained a greater portion of the rewards.

However, many employees argue that such rigid accounting fails to reflect the true collaborative nature of their work.

An employee from a DS process design research organization highlighted the dichotomy: while Samsung markets its integrated semiconductor approach as a competitive advantage for AI chips to external clients, this “integration suddenly disappears” during internal bonus discussions, with high-bandwidth memory (HBM) profits attributed solely to the Memory unit.

HBM serves as a prime illustration. Although marketed as a memory product, employees emphasize that the intricate base die beneath the memory stack – a vital logic component controlling data flow – is not exclusively the work of the Memory unit. This complex technology also draws heavily on logic design expertise from System LSI and advanced manufacturing capabilities from the Foundry side, components that Samsung proudly showcases externally.

Furthermore, the employee stressed that this issue extends beyond HBM. Even during conventional DRAM upcycles, gains are often contingent on foundational process development, yield enhancements, equipment stability, and technology transfers that originate outside the direct profit center receiving the financial rewards.

The ramifications of this bonus system extend beyond the internal conflict between Memory, Foundry, and System LSI.

A researcher at Samsung’s Semiconductor Research Center (SRC), a pivotal DS-wide research and development entity reporting to the division’s chief technology officer, revealed that the current bonus structure has historically prioritized “affiliation over actual contribution.” The SRC is responsible for pioneering advanced technologies that are subsequently transferred to business units for volume production.

According to the researcher, an engineer might transition from the Memory unit to the SRC to innovate on next-generation DRAM or HBM, only to find their bonus reduced simply because their “badge designates ‘research center,’ not ‘Memory.'”

This specific scenario adds complexity to the entire debate. Unlike Foundry or System LSI, the Semiconductor Research Center is not classified as a loss-making business unit; rather, it’s a shared R&D organization crucial for developing future Device Solutions products. Nevertheless, its employees report being excluded from the most lucrative reward structures, even when their work directly underpins technologies vital for the highly profitable Memory unit.

However, management’s apprehension is not unfounded, as articulated by a prominent local semiconductor industry official to The Korea Herald.

“Integration does not negate the principles of profit and loss (P&L),” the official emphasized. He argued that while cross-unit engineering collaboration is essential, it does not imply that every business unit contributed equally to the entire development process. An excessively uniform bonus pool, he cautioned, might diminish the “competitive discipline” and drive of individual units.

The official further asserted that Foundry must independently strive to secure major clients like Tesla and Nvidia, while System LSI needs to demonstrate its unique logic-chip prowess through products such as Exynos. An overly homogenous distribution of profits from Memory’s current upcycle, he concluded, could reduce the impetus for these units to achieve self-sufficiency and distinct market leadership.

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