Even with the 3 Highs, 'Labor Costs' Add to the Struggles of IT Companies

There Are Positive Effects Such as Preventing the Brain Drain of High-Level Talent

"Complex Management Crisis... Perceived More as a Cost Than an Investment"

On the 25th of last month, researchers shipped 3nm semiconductor mass production products at the world's first GAA (Gate-All-Around) based 3nm mass production shipment ceremony held at Samsung Electronics Hwaseong Campus in Hwaseong-si, Gyeonggi-do. / Hwaseong - Photo by Kim Hyunmin kimhyun81@

[Asia Economy Reporter Moon Chaeseok] The issue of labor costs in the information technology (IT) industry is a complex area. While it is clearly a factor driving cost increases, from the perspective of preventing talent outflow, it can also be seen as risk management. However, with the "3 highs" (high inflation, high interest rates, and high exchange rates) weighing down the global economy, the prevailing response is that rising labor costs are becoming a significant burden for IT companies as well. Samsung, SK, and LG are no exceptions.

According to the semi-annual reports submitted to the Financial Supervisory Service by each company on the 21st, as of June 30, Samsung Electronics' labor costs amounted to 15.9534 trillion won, an increase of 14.1% (1.9762 trillion won) compared to the same period last year. During the same period, LG Electronics' labor costs rose 22.7% to 4.9205 trillion won, and SK Hynix's increased 45.4% to 3.5977 trillion won.

Attention is also focused on Samsung Electronics. The company implemented the highest level of wage increases in history and went through negotiations with labor unions, which is different from before. The industry consensus is that the decision to raise wages by an average of 9% this year (5% base increase and an average 4% performance increase) significantly impacted the rise in labor costs. The reflection of last year's performance bonuses in this year's labor costs also played a role. A substantial increase in the number of employees is another major cause. As of the end of June, Samsung Electronics had a total of 117,321 domestic employees, an increase of 6,240 compared to the first half of last year?the largest increase ever.

In a market economy, hiring and salary issues should be thoroughly left to corporate autonomy, but the reality is not that simple. The lack of activation of job-based pay systems, the continuous rise in minimum wages, and the current reality where non-financial factors represented by ESG (Environmental, Social, and Governance) management directly impact brand reputation must be fully considered. Above all, the outflow of IT talent, regarded as top-tier experts, is tantamount to technology leakage and cannot be overlooked.

However, the industry consensus is that the combination of labor costs rising by tens of percent annually, continued sluggishness in raw material prices and memory semiconductor prices such as DRAM and NAND flash, the realization of international diplomatic and trade issues such as joining Chip4 (Korea, the United States, Japan, Taiwan), and U.S. restrictions on Chinese equipment imports constitute serious risk factors.

A semiconductor industry insider said, "It is hard to view tens of percent increases in costs compared to the first half as a natural phenomenon," adding, "The only way to overcome the crisis head-on is to focus on the 'basics,' such as expanding supply sources and securing a high-quality product portfolio."

This content was produced with the assistance of AI translation services.