Samsung faces strike after pay talks with union fall apart

SEOUL — The management and union leaders at Samsung Electronics failed to reach a last-minute deal on wages on Wednesday, raising the prospect of a strike at the South Korean electronics giant that could rattle global semiconductor supplies and the country's trade-dependent economy.

Government officials have threatened to invoke rarely used emergency powers to force a settlement at Samsung, where the union representing more than 70,000 workers says the company has failed to offer adequate compensation despite its soaring profits fueled by the global boom in artificial intelligence.

After the latest round of talks ended without a breakthrough on Wednesday, union leader Choi Seung-ho told reporters that unionized workers are set to begin an 18-day strike on Thursday.

Both the union and the management held each other responsible for a failure to reach a deal. Choi accused management of refusing to accept a government-mediated proposal, the details of which he refused to disclose. The management accused the union of calling for excessive compensation packages for workers at loss-making units.

The two sides said they will continue efforts to reach a deal. The two sides met again on Wednesday afternoon at the arrangement of Labor Minister Kim Young-hoon, according to Kim's ministry.

Samsung and its crosstown rival, SK Hynix, together produce about two-thirds of the world's memory chips, which are seeing surging demand driven by AI. Samsung said its operating profit for the January-March quarter jumped eightfold to a record 57.2 trillion won ($38 billion).

Union leaders have demanded a compensation structure in which Samsung would commit to spending 15 percent of its annual operating profit on employee bonuses and scrap bonus caps, which are currently set at 50 percent of annual salaries. The company says the demands are excessive, citing the highly cyclical nature of the semiconductor business. The strike is expected to hurt operations of Samsung's production of smartphones and other consumer electronics as well, observers say.