Key Highlights
- Shares of SK Hynix declined 4.9% on Tuesday following union rejection of a proposed compensation package
- Union members voted against the proposal by an extremely narrow marginājust 25 votes out of 15,045 ballots cast
- The proposed agreement featured a 6.3% salary increase alongside a modified bonus structure: 40% cash, 60% stock
- Employee opposition centered on concerns about exposure to stock market fluctuations through equity-based compensation
- South Korea’s KOSPI index dropped approximately 3% on Tuesday, with semiconductor stocks facing headwinds before Nvidia’s earnings release
Shares of SK Hynix experienced a significant decline of 4.9% to ā©1,611,000 on Tuesday after union representatives narrowly rejected a proposed wage settlement.
The voting outcome was remarkably tight. Among the 15,045 employees who participated in the ballot, exactly 50.08% opposed the agreement. The deciding difference amounted to merely 25 votes.
The proposed settlement, which had been negotiated the previous week, offered a 6.3% salary enhancement. Additionally, it restructured the company’s profit distribution system to allocate 40% of bonuses as cash payments and 60% as company equity.
The modified bonus framework proved to be the primary point of contention. Numerous employees objected to receiving the majority of their performance bonuses in stock form, expressing apprehension about the unpredictable nature of equity valuations.
The memory chipmaker’s stock reached its peak value in June, propelled by widespread optimism surrounding artificial intelligence-related demand. Since then, the shares have retreated amid growing skepticism about whether AI investments are generating sufficient returns.
Compensation Structure at Heart of Disagreement
According to a previous agreement established last year, SK Hynix allocates 10% of its yearly operating profit toward employee profit-sharing bonuses. This arrangement remains effective for a decade.
Presently, 80% of these performance bonuses are distributed as cash during the year they’re earned. The balance of 20% is paid out over a subsequent two-year period.
The company’s initiative to transition toward equity-heavy compensation met with opposition from employees who preferred maintaining a higher proportion in immediate cash payments.
When contacted by Reuters, SK Hynix had not yet provided a statement regarding the vote outcome.
Samsung’s Parallel Compensation Negotiations
The circumstances echo similar developments at Samsung Electronics, which resolved comparable labor negotiations earlier in the year.
During May, Samsung reached an agreement with union representatives on performance-based compensation that prevented potential work stoppages. The electronics giant committed to distributing 10.5% of its yearly semiconductor division operating profit as special bonuses for chip manufacturing employees.
These performance bonuses would be distributed as company shares, although most would be subject to immediate sale restrictions.
Both Samsung and SK Hynix have faced increased attention regarding their profit-sharing frameworks this year, following robust financial results driven by AI-related memory chip demand.
Samsung’s profit allocation announcement released earlier in the week fell short of market expectations, contributing to stock price declines for both Samsung and SK Hynix on Monday.
As the second-largest memory semiconductor manufacturer globally, SK Hynix has substantially benefited from surging demand for high-bandwidth memory products utilized in artificial intelligence systems.
South Korea’s broader equity market also experienced downward pressure on Tuesday. The KOSPI benchmark index fell approximately 3%, with semiconductor stocks bearing the brunt of the decline.
Market sentiment toward the chip sector remained cautious in anticipation of Nvidia’s upcoming quarterly earnings announcement scheduled for later this week, which investors view as a critical indicator of AI chip market demand.
As of 0036 GMT, SK Hynix shares were trading 4.9% lower, while the KOSPI index showed a 2.2% decrease during the same period.
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