SK Hynix Ahead of Labor Negotiations: "What If We Lose Our Talent?"

June Wage Negotiation Begins
Semiconductor Slump and Accumulated Deficits
"Over 5%" vs "2%+α" Expected
Retention Concerns Lead to Maintaining Competitor Levels

SK Hynix's wage negotiations (wage talks) are just around the corner. Amid expectations that wage increases at last year's level will be difficult due to the semiconductor industry's downturn, attention is focused on whether labor and management can minimize conflicts.

SK Hynix is expected to start wage negotiations in June. Currently, labor and management are scheduling negotiation dates. Typically, SK Hynix's wage negotiations have concluded around July. The SK Hynix labor union is largely divided into three groups: the Icheon and Cheongju production worker unions and the technical office worker union. The Icheon and Cheongju production worker unions present their wage increase demands to management under the name of the full-time union before negotiations. They are reportedly demanding an average increase of 5.8% compared to last year's annual salary.

Currently, SK Hynix has pre-reflected a 2% wage increase to account for inflation. The management is expected to propose an additional +α level on top of this. Due to the global semiconductor recession and accumulated deficits, increasing labor costs is a significant burden in many ways. SK Hynix decided on an 8.07% wage increase in 2021 and a '5.5% increase + a fixed monthly wage increase of 100,000 KRW' last year.

SK Hynix recorded a loss of over 3 trillion KRW in the first quarter alone this year. The company posted sales of 5.0881 trillion KRW and an operating loss of 3.4023 trillion KRW in Q1, marking a 58.1% decrease in sales compared to the same period last year (12.1557 trillion KRW) and a swing to an operating loss from an operating profit of 2.8639 trillion KRW. This is the second consecutive quarter of losses following a 1.8984 trillion KRW loss in Q4 last year. The securities industry expects an operating loss of around 3 trillion KRW in Q2 as well.

Samsung Electronics is in a similar situation. Samsung Electronics recorded a 4.48 trillion KRW loss in the semiconductor sector alone in Q1 this year and agreed on an average wage increase rate of 4.1% for this year. Compared to Samsung Electronics' average annual wage increase rate last year, this is about half. Samsung Electronics' wage increase rate last year was a record high of 9% (5% base increase + 4% performance increase).

SK Hynix Icheon Campus panorama. [Photo by SK Hynix]

An industry insider said, "When the semiconductor market was good, the term 'implation' (a portmanteau of 'wage' and 'inflation') was popular due to fierce wage increase competition," adding, "However, as semiconductor companies are expected to continue posting losses through Q2 this year, labor costs could become a factor that burdens corporate performance."

SK Hynix is expected to present figures similar to those of its competitors. In the semiconductor industry, cases of employees switching jobs to chase even slightly higher salaries occur frequently, so it is difficult to propose a lower increase rate than competitors. If a particular company first pays special bonuses or performance incentives, other companies tend to pay similar levels of bonuses as well. Recently, Chinese companies have been actively poaching domestic talent, deepening concerns. They are known to offer extraordinary salaries amounting to 3 to 4 times the existing annual salary.

An SK Hynix official said, "Wage negotiations will proceed starting next month," adding, "Since there are two unions even among full-time workers, after having sufficient discussions with these and the technical office worker unions, the wage increase rate will be decided."

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