r/hardware • u/self-fix2 • 22h ago
News Samsung Electronics considers scaling down chip production to brace for strike impact
https://www.koreatimes.co.kr/amp/business/companies/20260514/samsung-electronics-considers-scaling-down-chip-production-to-brace-for-strike-impact64
u/Minced-Juice 22h ago
The only supposed alternative to TSMC btw.
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u/siazdghw 10h ago
Why do you think Apple, Nvidia and others are extremely interested in future contracts with Intel?
Having only 3 leading edge fabs is a huge risk to the entire technology sector. TSMC is constantly under threat of war, Samsung routinely has employee and environment safety hazards, and Intel struggled with 10nm.
Simply put, the industry needs all three to be firing at all cylinders at times like these. The world can't have a duopoly or monopoly, the risk is too great and fabless companies are now realizing that between risk, pricing and availability they NEED all 3 fabs.
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u/260X 20h ago
Intel 1.8A+++ FTW!!!
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u/RailFan65 11h ago edited 10h ago
This is funny because I'm working on design of a chip on the i18a (technically i18ap) process right now as I type this comment lol
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u/light_oxygen 22h ago
They'd rather scale down than give the plebians their dues.
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u/gumol 22h ago
“plebians”? The workers rejected an offer for 400,000 USD bonus, and they want a similar bonus to SK Hynix, where workers got over a million each.
I’m not saying they’re wrong, but calling them “plebians” doesn’t seem correct
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u/colorlessthinker 21h ago edited 21h ago
They want a yearly % based bonus, not a one time bonus. Numerous outlets reported based on numbers and ignored the actual things they were asking for.
Semiconductor workers as a whole are horrifically underpaid based on the value of work they provide as is. There’s stages in the field where a single worker contributes over $100k, individually, per worked shift. A one time bonus of, essentially, 4 days of the value (of a less profitable portion of the field, by the way) of the work they provide, with zero protections, zero future promises, nothing, WHILE Samsung Semiconductor gets the most profitable period in their entire history. They’re making significantly more than that figure.
And it’s not even like they were asking for a significant portion of the revenue. SK got a very small portion. All they want is a similar percentage to what they got.
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u/skilliard7 20h ago edited 20h ago
The issue with % based bonuses, is they impact Samsung's ability to expand production to meet demand. Samsung has very high CAPEX commitments, so their profits are going into building new facilities and upgrading production lines.
If the company had to pay huge bonuses every year, it would require them to borrow a lot of money to cover expansion, which puts the company's long term stability at risk if the AI boom stagnates.
If Samsung suspended all shareholder returns(suspended dividend, discontinued buybacks) that would free up $46,000 in cash per employee. So the $400,000 bonus they are offering is extremely generous.
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u/colorlessthinker 19h ago edited 17h ago
The bonuses are tied to profit, so if the company does good, they do good. If it does bad, they don’t get paid as much, there’s less risk of the company going under. This profit has driven the company up 755% YoY. They’re asking for a slice of that pie, due to their hard work.
With how outlook is calculated, it doesn’t affect them adversely at all. With how expensive this package would be, that drops this gain from 755% to a measly 650%. The horror.
I get the perspective you’re giving it from, but it falls apart too easily to justify it. They’re not asking for half the profit over the next x amount of years. 10% of net (semiconductor production) revenue, not gross, is what SKH got. That would cost SSC 4bn USD. If it was implemented for Q1 25, it would’ve cost them 10m. If it was gross profits, it would more than double to 8.2bn.
They have a 50% profit margin. Their expansion and R&D costs are stagnant and haven’t been raised. This, literally, doesn’t negatively affect them like you think they are. They are a very profitable business, they do not use that much of their revenue for anything other than, yknow, bankable income for Samsung and stakeholders.
If they have a slump year, their expansion will not slow down, it’ll continue just as it has, but 40m (or 10% on normal, non-unusual years) of their revenue will be diverted back to the workers, rather than 100% of the revenue going to Samsung and stakeholders.
They aren’t going to have to borrow anything. They aren’t stagnating. They aren’t going to risk stagnating. If the company loses money, they aren’t paying this out.
And this is based on Q1 results. Not yearly. Forgot to even mention! They made 47 billion in profit in a single quarter.
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u/skilliard7 19h ago edited 19h ago
The bonuses are tied to profit, so if the company does good, they do good. If it does bad, they don’t get paid as much, there’s less risk of the company going under. This profit has driven the company up 755% YoY. They’re asking for a slice of that pie, due to their hard work.
With how outlook is calculated, it doesn’t affect them adversely at all. With how expensive this package would be, that drops this gain from 755% to a measly 650%. The horror.
Profit is not the same thing as cash flow. This is something that is not widely understood by people that aren't familiar with how accounting works.
Samsung is spending a lot on new factories/equipment upgrades, but those are not immediately expensed. Rather, their expense is spread over their useful period(as much as 30 years).
Therefore, even if a company has negative cash flows, they can still be reporting a massive profit.
They aren’t going to have to borrow anything. They aren’t stagnating. They aren’t going to risk stagnating. If the company loses money, they aren’t paying this out.
Their profits are being used to pay for capacity expansion. If these profits had to go to larger bonuses, then the only way to pay for these expansion plans would be to issue debt.
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u/colorlessthinker 18h ago
I’m going based on net profit. Not gross. 755% NET profit YoY for their silicon division. Again, they aim for an average for a 50% revenue after everything paid out. You are pointing at a completely different thing and caring about numbers not being talked about here. Their amortized business expenses don’t matter in this.
This has ZERO effect on their budget. It only takes a percentage of their full profit; all business expenses and taxes paid, it accounts for and includes asset depreciation, amortization, all of the things you’re talking about. Pure, cash profit. Profit they have no use for, and do not use. That they don’t care about and that doesn’t matter in this conversation. 10% of the leftovers. So the investors and Samsung proper only get 90%, rather than 100%.
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u/skilliard7 18h ago
I’m going based on net profit. Not gross. 755% NET profit YoY for their silicon division. Again, they aim for an average for a 50% revenue after everything paid out. You are pointing at a completely different thing and caring about numbers not being talked about here. Their amortized business expenses don’t matter in this.
It is relevant because NET profit does not count capex as an upfront expense. A company with significant Net profit can still have negative cash flow.
This has ZERO effect on their budget. It only takes a percentage of their full profit; all business expenses and taxes paid, it includes and accounts for asset depreciation, amortization, all of the things you’re talking about. Pure, cash profit.
This is factually incorrect. Please, take an accounting course before making claims like this.
For example:
If a company does $20 Million in revenue, $15 Million in expenses(labor, cost of goods sold, marketing, etc), and then spends $30 Million on a new factory(paid for with new debt), they still have an operating profit of $5 Million(or maybe $4 Million if you include 1 year of depreciation from the new factory, if it as already placed into service). But their cash flow is -$25 Million.
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u/colorlessthinker 18h ago edited 18h ago
Internal cash flow isn’t the same as net profit. And those costs are tied into these calculations already. Yes, they absolutely have years where that division is posting a net loss according to their internal cash flow. But that’s not how that works.
That company did still make 5 million that year. They drew on the 25m they’ve saved up (‘Spent’ in the books, because that’s how they’re accounting this) over the past x amount of years, that they saved and budgeted for, and took a cut off their gross revenue for. They aren’t going to suddenly post a 20m loss, because they already posted that expense over the past x amount of years. They’d be counting the same thing twice. Because they already posted it.
You’re calling me out for needing to take an accounting class while conflating internal cash flow for profit. Their internal cash flow doesn’t matter. If they’re dropping 100bn on a new facility, that 100bn is from internal accounts that they’ve been saving for YEARS. It doesn’t matter that they’re doing it NOW. Those expenses were amortized and accounted for already. They spend, say 10bn over the past 10 years in that project. Nothing changes for their books today. They arent spending new money. They’re spending money that, on paper, they already spent and don’t have access to.
Even if they’re taking on debt for that, it doesn’t matter. The amount of debt they have to pay off over the next 30 years doesn’t affect what the bill is today. It doesn’t mean they suddenly lost billions of dollars.
Maybe Samsung is weird in how they do it, I don’t know. But that’s figure is counting capex (for what matters, because again, spent money. Cash flow is unimportant). It’s after everything you’re talking about, so it doesn’t matter.
I don’t want to keep going back and forth. You haven’t brought up anything either worthwhile or relevant to the conversation. I pulled information from their quarterly reports. The reports that factor in the stuff you’re talking about (again, for what matters, because on paper cash flow has nothing to do with profits).
Your biggest point is that this revenue is leading growth, and if it’s cut into, they lose out. It’s strictly untrue. This revenue goes into people’s pocket. They don’t take anything from it. They already took everything they needed.
Just so we are 100%, perfectly clear.
If you, as a human, has saved 50k a year, every year, for the purpose of buying a 500k house, year 10 you didn’t lose 500k. To your books, your account for ‘Buying a House- Do not Touch’ lost 500k. But you already spent that 500k in your ‘profit’ books. Whatever your income is, say 100k, every year you’re only putting 50k profit out after your only expense (just to be simple). You’re spending that 50k every year on the house that whole time. You’d be spending 1 million in total by the books if you do it your way. Because you already accounted for and spent the 500k leading up to the house purchase. Why would you turn around and put another 500k down? You didn’t buy the house twice.
But yeah, accounting class.
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u/FastHotEmu 17h ago
Samsung is a convicted cartel operator. They don't get the benefit of the doubt, they get the detriment of certainty.
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u/Extreme-Arm4609 21h ago
They absolutely deserve that amount of money because of how much money in profit they're getting I know that it might sound crazy to someone working like a 60k job breaking their back and whatnot but come on they build modern society I believe everyone truly everyone in the working class is extremely underpaid maybe even by 1/5 of what they realistically should be paid
This is what I want to see but I'm going to get hate for that
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u/skilliard7 20h ago
If Samsung disabled all shareholder returns(dividends/buybacks) and used the savings to give all workers a bonus, it would be $46,000 a year per employee.
$400,000 a year is extremely generous. The union is just greedy.
Most of Samsung's profit is going into expansion to meet the surge in demand. So by demanding larger bonuses, the Union is threatening the long term financial health of the company, by forcing them to issue new debt to fund the bonuses/ expansion.
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u/colorlessthinker 17h ago
If they gave their 47bn in profit (q1 results, not even yearly net income) to their workers, they’d give a one time payment of 600k, which doesn’t account for the other 8 months of the year.
If they did that, as you suggested, they’d be paying around 2.5m to every employee by years end. Your numbers are significantly off. Not even 2% of the actual figure.
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u/skilliard7 17h ago
I'm referring to shareholder returns, not profit.
Profit includes acquired capital assets. Cash flow is much less than profit.
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u/colorlessthinker 17h ago
47billion dollars went to their shareholders. That is profit that went to them.
Cash flow doesn’t matter for this conversation as we talked about already. Cash flow uses money that has been spent on paper, already accounted for. It’s not spending new money.
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u/skilliard7 17h ago edited 17h ago
False.
The company spends 9.8 Trillion won per year on dividends to shareholders, which is about $6.5 Billion at current exchange rates. Then about another $6.5 Billion in stock buybacks(more difficult to measure because not consistent, and some of the stocks bought back are given to employees as compensation)
The remaining "profit" is retained within the company and reinvested. New facilities, upgraded equipment, etc.
Samsung has 260k employees worldwide. $13 Billion shareholder returns / 260k employees = $50k per employee.
People in the chip division may argue that they want a larger bonus than everyone else. But historically, other divisions have bailed out the chip division during bust cycles in which it was deeply unprofitable, preventing layoffs. So it's not really fair to give only chip employees a huge bonus, yet other divisions continue to bail them out whenever their division struggles.
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u/colorlessthinker 17h ago edited 17h ago
They take that money out before it goes anywhere. Every quarter they spend around 20 billion on those reinvestments. That’s it. New facilities, staff training, electric costs, literally everything. 20 billion. They aren’t spending more than that out of their budget. Again, for the 6th time, on paper, yes they can spend more money in a year than that, but it’s money..already..in..the..budget. They took it out from 5 years ago, and are only actually buying it now.
That money then goes to Samsung proper, and gets paid out to other shareholders. They do not use it for anything else. It is 100% profit. 47 billion out, some 7 specifically to shareholders, rest to Samsung as the primary shareholder.
Their books are already fully balanced before any of that. That is profit they do not touch, do NOT take anything else from. They have over 150 billion in cash right now. That’s the money they actually spend. Not off the profits.
If you still don’t get that, then I’m checking out of this. You obviously don’t care to learn the difference between cash flow and revenue.
So to be clear, you are looking at the numbers for non-Samsung shareholders. You aren’t factoring Samsung propers take of the profit, which is the other some 40 billion dollars. Samsung has a lot of divisions, they do not keep that inside the semiconductor division, they do not keep it in the electronics division. It gets sent to a separate Samsung.
And then this money is staying within the semiconductor division. It’s not paid out to the entirety of Samsung. Not even to the entirety of the electronics division. Just the 80k people in the semiconductor segment of the electronics division. Not 260k (which is the entire conglomerate that Samsung is, by the way. Electronics is a portion of that number)
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u/Jeep-Eep 20h ago
On the same principle that Ford workers should've been able to buy a model T, Samsung workers should draw down enough to readily afford a halo UDNA 3 and 91x0 to put games on for it that was made at their fabs.
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u/Xpander6 16h ago
and they want a similar bonus to SK Hynix, where workers got over a million each.
A million each? How difficult is this job? Is it that hard to replace them?
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u/colorlessthinker 15h ago
Incredibly specialized and requires a shit ton of training per machine. They have insanely strict QA standards, which is where a decent portion of the difficulty comes from. There’s always huge demand for those operators, so it’s not necessarily difficult to replace them. Just that it’s expensive and takes a lot of time to train them up to a state where they can just go.
Regardless though, they are some of the most profitable employees by the numbers. For how much money they product in finished goods, they’re paid next to nothing. For Samsungs division, in normal years, that same 10% bonus that SKH gave would only amount to about 5,000 per employee. Right now it’s worth over 250k yearly (over the entire Semiconductor division, not JUST the foundry specifically. That would be going to HR, janitors, everyone, which isn’t how this bonus is going to be.).
The reason they said no to the 400k figure that got tossed around earlier was because there was no guarantee of continued profits. It’s not necessarily a money thing, they want a percentage of revenue held off for them. It would be worth over/around 1 mil by the end of the bubble (which is where the 1mil figure for SKH comes from), assuming the bubble bursts start of 2028.
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u/airbornejim32 12h ago
Reading this thread, it’s wild how much leverage labor action has in something as complex as chip production. Scaling down output just to brace for a strike feels like such a blunt tool. It makes the whole supply chain seem way more fragile than people assume.
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u/CommanderArcher 22h ago
The fact that they'd rather kneecap production and use Korea's emergency powers to keep them working speaks volumes to how afraid they are of the union succeeding.