New compensation structure could hand memory sector employees nearly W600m while loss-making units lag behind
Samsung Electronics’ memory-chip employees could see combined incentives approaching 600 million won ($398,900) this year, a stark contrast to colleagues in loss-making chip units who might receive less than a third of that amount.
This significant compensation disparity is embedded within the bonus formula of Samsung’s newly forged labor agreement. While establishing a foundational bonus for all semiconductor division employees, the structure allows memory business personnel to earn substantially more, as the majority of an employee’s bonus payout is directly linked to their specific business unit’s performance.
It’s crucial to note that these figures are scenario-based projections, not guaranteed paychecks. Furthermore, this innovative incentive is not disbursed in cash. Instead, Samsung’s newly established semiconductor special bonus will be paid entirely in post-tax Samsung Electronics shares. Employees will have immediate access to sell one-third of these shares, with the remaining portions vesting equally over one and two years respectively.
This groundbreaking agreement introduces a special management performance bonus specifically for Samsung’s Device Solutions (DS) division, the company’s powerhouse semiconductor arm. The DS division encompasses critical areas such as memory chips, advanced foundry manufacturing, System LSI logic-chip design, and various division-wide common organizations.
The total bonus pool is meticulously set at 10.5 percent of an agreed measure of business performance, notably with no individual cap for workers. While local estimations frequently utilize operating profit as the benchmark, the definitive metric for calculation may ultimately vary.
This substantial pool is subsequently divided into two distinct components. The initial 40 percent is broadly allocated across the entire DS division, ensuring a base distribution irrespective of an employee’s specific business unit.
Should industry projections of 300 trillion won in operating profit materialize this year, the overall special bonus pool could ascend to 31.5 trillion won. From this, the 40 percent division-wide allocation would translate to 12.6 trillion won, equating to approximately 160 million won per individual when distributed among the roughly 78,000 DS employees.
The remaining 18.9 trillion won is earmarked for distribution primarily based on individual business-unit performance. Under present assumptions, this substantial sum would overwhelmingly favor Samsung’s highly profitable memory business, which is significantly bolstering the company’s chip profits due to robust demand for AI-related memory solutions. Conversely, Foundry and System LSI units, currently projected as loss-making in these calculations, would garner considerably less from this performance-weighted incentive segment.
Market analysts estimate an additional share of approximately 380 million won each for memory employees from this performance-driven component.
Adding to these incentives, Samsung’s well-established Overall Performance Incentive (OPI) system continues to operate. The OPI is Samsung’s annual profit-based bonus program, capable of paying up to 50 percent of an employee’s annual salary, contingent upon their respective business unit’s financial outcomes. For instance, a memory division employee earning 100 million won annually could receive an OPI payout of up to 50 million won.
This comprehensive calculation illustrates how the total compensation for workers within the thriving memory division can approach the 600 million won mark: comprising approximately 160 million won from the division-wide foundational bonus, an estimated 380 million won from the performance-weighted share, and up to 50 million won from the existing OPI program.
Strategically positioned between the high-performing memory sector and the currently loss-making non-memory units are Samsung’s common organizations. These encompass crucial DS-wide functions such as research and development, manufacturing infrastructure, and essential support services that are not exclusive to a single product line. Under the new agreement, their payout rate is set at 70 percent of the memory business rate, translating to an estimated special bonus of roughly 430 million won within the aforementioned 300 trillion won operating-profit scenario.
For the current year, employees in the Foundry and System LSI divisions are anticipated to primarily receive the division-wide foundational bonus, estimated at 160 million won, as the penalty for loss-making units has been deferred for twelve months. However, commencing in 2027, units operating at a loss will be subject to a reduced payout, receiving only 60 percent of the common payout rate derived from the overall division-wide pool.
This comprehensive compensation framework is projected to operate for a decade, contingent upon Samsung’s semiconductor division successfully navigating and clearing significant profit hurdles. Specifically, the special bonus will be activated when the DS division achieves an annual operating profit of 200 trillion won from 2026 to 2028, and 100 trillion won from 2029 to 2035.
This crucial caveat underscores the inherent volatility of the semiconductor business, a notoriously cyclical industry. Illustratively, Samsung’s chip division recorded a substantial 14.9 trillion won operating loss in 2023 amidst the most recent memory market downturn.
Ultimately, this strategic deal positions Samsung more closely with a profit-linked compensation model, a system already successfully implemented by competitor SK Hynix. SK Hynix notably eliminated the cap on its profit-sharing system and directly linked payouts to 10 percent of operating profit last September, setting a precedent for performance-driven incentives in the sector.
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