The New Threat to the Chip Industry - Worker Unrest

Inside the cavernous factories of Samsung Electronics, rows of white machines pump out memory chips around the clock, with help from just a few workers. Until this month, Kim Jae-won was one of them.

Now he is on an indefinite strike with thousands of colleagues in South Korea. They sit on the front lines of an issue affecting semiconductor makers globally: With the industry growing in importance and investment pouring in, how much of the bonanza should go to workers?

Kim is a member of a labor union at Samsung demanding greater pay and benefits from the world’s largest memory-chip maker, which is also spending roughly $45 billion on two new production plants and a chip-packaging facility in Texas with backing from the Biden administration.

In the U.S., unions are trying to organize employees at several chip plants whose owners are set to receive government money, including from the 2022 Chips and Science Act.

Samsung says the strike isn’t affecting production at its three chip-manufacturing sites in South Korea. It says it will continue to ensure no disruptions occur. On Tuesday, the two sides held their first round of talks since the strike began,

without reaching a resolution. “We hope the situation can be resolved as soon as possible,” a Samsung spokeswoman said. The 24-year-old Kim is an engineer responsible for detecting equipment failures and replacing parts, among other tasks. Samsung’s factories run around the clock, pumping out the kind of chips used in products such as smartphones, computers and data servers.

A typical eight-hour shift often involves five maintenance issues or more, Kim said.

“The company says there is a high level of automation, but in reality, without maintenance engineers at work, dozens of errors can occur in a single step of the chip-making process,” he said.

Hundreds of billions of dollars in investment globally is flooding into semiconductors. The U.S. and its allies view chip making as a strategic industry, giving momentum to workers’ demands for better treatment. Annual revenue for the industry is expected to double to $1 trillion by the decade’s end.

Similar showdowns over workers and technology have unfolded in the auto industry, at United Parcel Service and among Hollywood writers and actors. In 2023, the U.S. experienced around 470 strikes involving around 540,000 workers, more than double the number of workers involved in the previous year, according to a tally maintained at Cornell University’s School of Industrial and Labor Relations.

Most of the world’s semiconductor hubs, including those in the U.S., South Korea and Taiwan, have been union-free in recent decades. That has begun to change.

Dating to 2019, the Samsung union says it has grown to represent about one-quarter of Samsung Electronics’ roughly 125,000 workers in South Korea across businesses including semiconductors, smartphones and appliances. In 2020, Samsung head Lee Jae-yong apologized for the company’s past union-busting practices.

The union hasn’t disclosed how many people are on strike, but it said roughly 6,500 members—most of them employed in chip production—participated in a rally kicking off the walkout on July 8.

At the rally, rows of union members decked out in black raincoats and red bandannas saying “all-out strike” raised their fists. Previously, the union staged a one-day walkout in June, the first-ever strike at Samsung.

Earlier this month, more than a dozen employees at an Analog Devices factory in Oregon held a rally, calling for safer working conditions and a minimum wage at the factory of $27 an hour. They cited support the factory is getting from the state, as well as potential federal support under the chips law.

An Analog Devices spokeswoman said the company respected its employees’ right to express their views and wanted to address their concerns.

The Communications Workers of America union has been pushing to organize workers at some of the biggest U.S. chip companies, including Intel. Carl Kennebrew, president of the union’s industrial division, pointed to the disruptions in South Korea and called on U.S. companies receiving money from the federal government to reach labor agreements.

In May, the union started talks with Micron Technology over an agreement that would give the union favorable conditions to seek to organize workers at new plants in New York and Idaho. It reached such a deal—the first between CWA and a chip maker—last November with California-based Akash Systems. Micron said it respected the rights of workers to form unions. Intel declined to comment.

The Samsung union, which hasn’t disclosed the current wage levels of its members, is calling for an average 3.5% increase in base salary, an extra vacation day and a different bonus plan.

Samsung said it has already negotiated salaries with a work council that includes representatives of workers and offered the same terms to union members.

The South Korean company is rebounding from a recent downturn in the memory-chip market and has estimated that its second-quarter operating profit reached $7.5 billion, a nearly 16-fold increase from the prior year.

The strikers have especially targeted older production lines, such as one in the city of Kiheung that uses 8-inch wafers and is less automated. Newer chips are typically produced on 12-inch wafers.

The union has said the operational rate at the Kiheung facility’s 8-inch wafer production line dropped to 18% from 80% after the first week of the strike, part of its response to the company’s assertion that there haven’t been disruptions.

Independent data on production weren’t available. Jang Young-jae, a semiconductor systems engineering professor at the Korea Advanced Institute of Science and Technology, said a chip factory might get by with reduced staff for a few weeks by skipping tasks such as regular maintenance but eventually would suffer an impact.

Kang Kee-uk, a 30-year-old striker, has been working as an equipment-maintenance engineer for 11 years at one of Samsung’s DRAM memory-chip production lines. He said he felt management viewed the contributions of workers as minimal.

A Samsung spokeswoman said the company recognizes its business success comes from the success of its employees and it respects lawful union activities.

“The company keeps telling us to have pride. But that’s hard to do,” Kang said.