Samsung Electronics considers scaling down chip production to brace for strike impact
Posted by self-fix2@reddit | hardware | View on Reddit | 55 comments
airbornejim32@reddit
Reading this thread, it’s wild how much leverage labor action has in something as complex as chip production. Scaling down output just to brace for a strike feels like such a blunt tool. It makes the whole supply chain seem way more fragile than people assume.
00raiser01@reddit
It works for any industry, but people in general forgotten how to fight for what they deserve. The owner class does not deserve what they get. Cause they been exploiting workers output because they managed to make everyone forget the amount of demand they can command.
theunspillablebeans@reddit
Apes together strong!
light_oxygen@reddit
They'd rather scale down than give the plebians their dues.
gumol@reddit
“plebians”? The workers rejected an offer for 400,000 USD bonus, and they want a similar bonus to SK Hynix, where workers got over a million each.
I’m not saying they’re wrong, but calling them “plebians” doesn’t seem correct
Xpander6@reddit
A million each? How difficult is this job? Is it that hard to replace them?
00raiser01@reddit
Yes, so pay up.
colorlessthinker@reddit
Incredibly specialized and requires a shit ton of training per machine. They have insanely strict QA standards, which is where a decent portion of the difficulty comes from. There’s always huge demand for those operators, so it’s not necessarily difficult to replace them. Just that it’s expensive and takes a lot of time to train them up to a state where they can just go.
Regardless though, they are some of the most profitable employees by the numbers. For how much money they product in finished goods, they’re paid next to nothing. For Samsungs division, in normal years, that same 10% bonus that SKH gave would only amount to about 5,000 per employee. Right now it’s worth over 250k yearly (over the entire Semiconductor division, not JUST the foundry specifically. That would be going to HR, janitors, everyone, which isn’t how this bonus is going to be.).
The reason they said no to the 400k figure that got tossed around earlier was because there was no guarantee of continued profits. It’s not necessarily a money thing, they want a percentage of revenue held off for them. It would be worth over/around 1 mil by the end of the bubble (which is where the 1mil figure for SKH comes from), assuming the bubble bursts start of 2028.
Extreme-Arm4609@reddit
They absolutely deserve that amount of money because of how much money in profit they're getting I know that it might sound crazy to someone working like a 60k job breaking their back and whatnot but come on they build modern society I believe everyone truly everyone in the working class is extremely underpaid maybe even by 1/5 of what they realistically should be paid
This is what I want to see but I'm going to get hate for that
skilliard7@reddit
If Samsung disabled all shareholder returns(dividends/buybacks) and used the savings. to give all workers a bonus, it would be $46,000 a year.
So $400,000 a year is extremely generous. The union is just greedy.
Most of Samsung's profit is going into expansion to meet the surge in demand. So by demanding larger bonuses, the Union is threatening the long term financial health of the company, by forcing them to issue new debt to fund the bonuses.
colorlessthinker@reddit
If they gave their 47bn in profit (q1 results, not even yearly net income) to their workers, they’d give a one time payment of 600k, which doesn’t account for the other 8 months of the year.
If they did that, as you suggested, they’d be paying around 2.5m to every employee by years end. Your numbers are significantly off. Not even 2% of the actual figure.
skilliard7@reddit
I'm referring to shareholder returns, not profit.
Profit includes acquired capital assets. Cash flow is much less than profit.
colorlessthinker@reddit
47billion dollars went to their shareholders.
Cash flow doesn’t matter for this conversation as we talked about already.
skilliard7@reddit
False.
The company spends 9.8 Trillion won per year on dividends to shareholders, which is about $6.5 Billion at current exchange rates. Then about another $6.5 Billion in stock buybacks(more difficult to measure because not consistent)
The remaining "profit" is retained within the company and reinvested. New facilities, upgraded equipment, etc.
Samsung has 260k employees worldwide. $13 Billion shareholder returns / 260k employees = $50k per employee.
colorlessthinker@reddit
They take that money out before it goes anywhere. Every quarter they spend around 20 billion on those reinvestments. That’s it. New facilities, staff training, electric costs, literally everything. 20 billion. They aren’t spending more than that out of their budget. Again, for the 6th time, on paper, yes they can spend more money in a year than that, but it’s money..already..in..the..budget. They took it out from 5 years ago, and are only actually buying it now.
That money then goes to Samsung proper, and gets paid out to other shareholders. They do not use it for anything else. It is 100% profit. 47 billion out, some 7 specifically to shareholders, rest to Samsung as the primary shareholder.
Their books are already fully balanced before any of that. That is profit they do not touch, do NOT take anything else from.
This money is staying within the semiconductor division. It’s not paid out to the entirety of Samsung. 80k people. Not 260k.
colorlessthinker@reddit
They want a yearly % based bonus, not a one time bonus. Numerous outlets reported based on numbers and ignored the actual things they were asking for.
skilliard7@reddit
The issue with % based bonuses, is they impact Samsung's ability to expand production to meet demand. Samsung has very high CAPEX commitments, so their profits are going into building new facilities and upgrading production lines.
If the company had to pay huge bonuses every year, it would require them to borrow a lot of money to cover expansion, which puts the company's long term stability at risk if the AI boom stagnates.
colorlessthinker@reddit
The bonuses are tied to profit, so if the company does good, they do good. If it does bad, they don’t get paid as much, there’s less risk of the company going under. This profit has driven the company up 755% YoY. They’re asking for a slice of that pie, due to their hard work.
With how outlook is calculated, it doesn’t affect them adversely at all. With how expensive this package would be, that drops this gain from 755% to a measly 650%. The horror.
I get the perspective you’re giving it from, but it falls apart too easily to justify it. They’re not asking for half the profit over the next x amount of years. 10% of net (semiconductor production) revenue, not gross, is what SKH got. That would cost SSC 4bn USD. If it was implemented for Q1 25, it would’ve cost them 10m. If it was gross profits, it would more than double to 8.2bn.
They have a 50% profit margin. Their expansion and R&D costs are stagnant and haven’t been raised. This, literally, doesn’t negatively affect them like you think they are. They are a very profitable business, they do not use that much of their revenue for anything other than, yknow, bankable income for Samsung and stakeholders.
If they have a slump year, their expansion will not slow down, it’ll continue just as it has, but 10m (or 10% on normal, non-unusual years) of their revenue will be diverted back to the workers, rather than 100% of the revenue going to Samsung and stakeholders.
skilliard7@reddit
Profit is not the same thing as cash flow.
Samsung is spending a lot on new factories/equipment upgrades, but those are not immediately expensed. Rather, their expense is spread over their useful period(as much as 30 years).
Therefore, even if a company has negative cash flows, they can still be reporting a profit.
colorlessthinker@reddit
I’m going based on net profit. Not gross. 755% NET profit YoY for their silicon division. Again, they aim for an average for a 50% revenue after everything paid out. You are pointing at a completely different thing and caring about numbers not being talked about here. Their amortized business expenses don’t matter in this.
This has ZERO effect on their budget. It only takes a percentage of their full profit; all business expenses and taxes paid, it includes and accounts for asset depreciation, amortization, all of the things you’re talking about. Pure, cash profit. Profit they have no use for, and do not use.
skilliard7@reddit
It is relevant because NET profit does not count capex as an upfront expense. A company with significant Net profit can still have negative cash flow.
This is factually incorrect. Please, take an accounting course before making claims like this.
For example:
If a company does $20 Million in revenue, $15 Million in expenses(labor, cost of goods sold, marketing, etc), and then spends $30 Million on a new factory(paid for with new debt), they still have an operating profit of $5 Million. But their cash flow is -$25 Million.
FastHotEmu@reddit
Samsung is a convicted cartel operator. They don't get the benefit of the doubt, they get the detriment of certainty.
colorlessthinker@reddit
Internal cash flow isn’t the same as net profit. And those costs are tied into these calculations already. Yes, they absolutely have years where that division is posting a net loss according to their internal cash flow. But that’s not how that works.
That company did still make 5 million that year. They drew on the 25m they’ve saved up (‘Spent’ in the books, because that’s how they’re accounting this) over the past x amount of years, that they saved and budgeted for, and took a cut off their gross revenue for. They aren’t going to suddenly post a 20m loss, because they already posted that expense over the past x amount of years. They’d be counting the same thing twice. Because they already posted it.
You’re calling me out for needing to take an accounting class while conflating internal cash flow for profit. Their internal cash flow doesn’t matter. If they’re dropping 100bn on a new facility, that 100bn is from internal accounts that they’ve been saving for YEARS. It doesn’t matter that they’re doing it NOW. Those expenses were amortized and accounted for already. They spend, say 10bn over the past 10 years in that project. Nothing changes for their books today. They arent spending new money. They’re spending money that, on paper, they already spent and don’t have access to.
Even if they’re taking on debt for that, it doesn’t matter. The amount of debt they have to pay off over the next 30 years doesn’t affect what the bill is today. It doesn’t mean they suddenly lost billions of dollars.
Maybe Samsung is weird in how they do it, I don’t know. But that’s figure is counting capex. It’s after everything you’re talking about, so it doesn’t matter.
FastHotEmu@reddit
How much Samsung are you holding, bro?
Jeep-Eep@reddit
On the same principle that Ford workers should've been able to buy a model T, Samsung workers should draw down enough to readily afford a halo UDNA 3 and 9x00 to put games on for it that was made at their fabs.
CommanderArcher@reddit
The fact that they'd rather kneecap production and use Korea's emergency powers to keep them working speaks volumes to how afraid they are of the union succeeding.
skilliard7@reddit
They made offers to the union which involved $300k bonuses. The union rejected it.
Kneecapping production is a necessity. If workers walk off mid production, there is tremendous loss/waste.
farukosh@reddit
300k bonuses is peanuts compared to what the company will actually make, this isn't america.
StickiStickman@reddit
For everyone? That's more than substantial
CommanderArcher@reddit
Can't offer 300k when SK Hynix Is doing 500k+
The cost of doing business includes labor and labor gets to negotiate whether Samsung likes it or not.
skilliard7@reddit
If individuals want to quit to go work for SK Hynix, that's fine.
But strikes are a form of anticompetitive practices. They are colluding and extorting a business, and preventing competition.
DuranteA@reddit
What the flying fuck.
CommanderArcher@reddit
The businesses collude to screw over workers and we call it a great deal, the workers collude to get some of the crumbs and we call it extortion.
Z3r0sama2017@reddit
Don't forget screw overconsumers too!
skilliard7@reddit
There are far more laws against corporations colluding than there are against unions.
Imagine if AMD, Intel, and Nvidia colluded, agreeing not to sell any consumer GPUs below $2,500, to keep prices high. That is highly illegal, but that's essentially what unions do with labor.
I can understand rooting for the little guy, but the problem here is its the rest of the world that pays the price. This strike will raise prices of electronics even further than they already have due to worsening shortages. Which is why the government needs to step in.
ForgottenCrafts@reddit
Oh nooo, someone think of the multi billion dollar chaebol literally controlling the korean economy!!!
CommanderArcher@reddit
Genuinely I don't have to imagine, they literally did this and got sued for it.
Intel also colluded with PC manufacturers to keep AMD cpus out of laptops and prebuilts to try and stifle AMD.
Labor deserves more than what they're getting when the executive payroll looks more like a small country's GDP.
FastHotEmu@reddit
Do we have to remind that guy that labour is *actual people* whereas companies are *not real people*?
FastHotEmu@reddit
Right here, officer. I found the stupidest take.
Some person arguing that a group of employees organising against an unfair, previously convicted monopolistic company that is an active part of an actual anticompetitive cartel are... *checks notes* "anticompetitive practices" as if the group of people was a company.
Wow. I think I got cancer just by reading that.
No_Sheepherder_1855@reddit
It’s not a person.
FastHotEmu@reddit
Are you saying that skilliard7 is not a person? If so, do you have any evidence to back it up?
justice_for_lachesis@reddit
lol you're a serf
260X@reddit
Samsung should try to evoke the sense of patriotism among its workers since Samsung accounts for well over 10% of South Korea's GDP.
"Make Korea Great Again" or something similar to that effect.
It's effective!
work-school-account@reddit
South Korea's own name for itself, Daehan-Minguk, translates to something about "the great Han nation". "Han" here is different from Han-Chinese, and it roughly translates to "great". So they were to adopt that slogan, it would translate to something like "Make the great nation of the great people great again".
AlgaeDonut@reddit
So that's like ultra mega great.... perfect
DerpSenpai@reddit
They aren't against giving the workers the share of the profits, the issue is the industry works in boom bust cycles and they proposed the profits be rolling. This way the workers get something every year and not just today
gelade1@reddit
So they are against giving the workers the share of the profits.
DateMasamusubi@reddit
I wonder how much money they need to backfill their prior lacklustre years. It wasn't long ago when people here writing about Samsung's fall and demise.
CommanderArcher@reddit
Samsung cannot fail, it's not allowed to.
So the doomers were all assuming that Samsung would be outproduced and fall behind on innovation but right now the whole industry is a volume issue more than anything else so those issues don't matter much.
I wouldn't be surprised if Samsung cleared its "backfill" already.
ML7777777@reddit
They would still say that today but with the profits from memory they would only expose their agenda and bias against the brand. Keep in mind much of the reasoning was based off rumors and nothing solid. Still, recently there was a guy here saying Samsung is bleeding money in other areas but anyone with internet access can view their financials and know its bullshit. Even their Foundry Services increased revenues by 80% and with key wins, and more importantly, contracts signed, they aren't going broke anytime soon as much as it pains certain demographics here to admit it.
Minced-Juice@reddit
The only supposed alternative to TSMC btw.
260X@reddit
Intel 1.8A+++ FTW!!!
RailFan65@reddit
This is funny because I'm working on chip on i18a process right now as I type this comment lol
wrhollin@reddit
Is the process any good?
siazdghw@reddit
Why do you think Apple, Nvidia and others are extremely interested in future contracts with Intel?
Having only 3 leading edge fabs is a huge risk to the entire technology sector. TSMC is constantly under threat of war, Samsung routinely has employee and environment safety hazards, and Intel struggled with 10nm.
Simply put, the industry needs all three to be firing at all cylinders at times like these. The world can't have a duopoly or monopoly, the risk is too great and fabless companies are now realizing that between risk, pricing and availability they NEED all 3 fabs.