UPDATE 9-Samsung union suspends planned strike after reaching tentative pay deal

Samsung Electronics' union said it would suspend a strike shortly before it was set to begin on Thursday after it reached a tentative pay deal with the company, averting action that threatened South Korea's economy and global chip supply.

The planned 18 days of strike action by nearly ‌48,000 union members will be suspended while the tentative agreement is put to a vote by members. Samsung remains one of the most sought-after workplaces in Korea, but employees were angry about the pay gap with smaller rival SK Hynix and also the proposed distribution of bonuses between Samsung's business units.

The vote will take place from May 22 to 27, union leader Choi Seung-ho told reporters late on Wednesday. An earlier notice posted on the union's website had set the dates as May 23 to 28. Samsung Electronics ‌said in a separate statement that the two parties had reached a tentative agreement on wages and collective bargaining and pledged to "build mature and constructive labour-management relations."

The 11th-hour deal came after days of talks that broke down multiple times, ‌including earlier on Wednesday when the union announced that it would go ahead with the strike. Talks restarted later in the day after South Korean Labour Minister Kim Young-hoon personally stepped in to mediate. THORNY ISSUE OF BONUS SPLIT

The two sides had been at odds over how performance bonuses would be distributed between the conglomerate's hugely profitable memory business and loss-making logic chip businesses, Reuters has previously reported. Choi said they had agreed on how to distribute profit to loss-making businesses and he expects union members to approve the wage deal.

"We will do our utmost to stabilize labor-management relations at Samsung Electronics going forward," ⁠he said. Samsung accepted ​the union's demands to abolish the 50% cap on bonuses, to ⁠link bonuses to operating profits and to formalize the changes in contracts, said one of the union negotiators, who declined to be named as he was not authorized to talk to the media. "It's a very nice deal."

In addition, Samsung is expected to set aside about 10.5% of "agreed business ⁠performance" for special bonuses for the chip division which houses its memory and logic chip businesses, according to a document shared by the union. The union negotiator said the performance metric referred to operating profit.

The special bonuses will be paid in company stock for at least 10 ​years, with targets for the chip division to achieve more than 200 trillion won ($133.58 billion) in annual operating profit from 2026 to 2028 and 100 trillion won from 2029 to 2035, the document showed. Samsung declined to comment ⁠on the details of the deal.

RELIEF THAT DEAL MAY BE IN SIGHT Samsung, which accounts for almost a quarter of South Korea's exports, is also the world's largest memory chip maker, meaning the threatened strike action risked disruptions that would fuel price rises at a time when the AI boom has caused shortages.

"We ⁠are ​grateful for the broad-minded decision made in the interest of both the country and the public," an official at South Korea's Blue House said, according to the Yonhap news agency. "This outcome was made possible by the efforts of government officials, including the labour minister, who mediated until the end." An official from the country's central bank, who declined to be named, had forecast that the strike could shave 0.5 percentage points off a forecast 2.0% expansion for the South Korean economy this year.

South ⁠Korean government officials had flagged that they could order emergency arbitration, a tool that has been rarely employed but could have put the strike on hold for 30 days. Users of an online message board for Samsung shareholders posted messages ⁠of relief. "I am sending gratitude and congratulations to everyone", said one ⁠message. Others cheered the proposal to pay out bonuses in company stock, saying it could help Samsung's share price.

Samsung shares ended up 0.2% and have lost 2.8% for the week to date. Some investors said they were more concerned about the prospects of a permanent spike in labour costs than they were about the one-off costs of the strike. ($1 = 1,497.2000 won)

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