Samsung, SK Hynix Incentive Pay Row Emerges as Broad Societal Issue

As Samsung Electronics and SK Hynix have seen significant increases in company profits driven by advancements in artificial intelligence (AI) technology, internal debates over performance bonuses for employees have emerged as a critical issue for the broader South Korean economy. SK Hynix has committed to distributing bonuses amounting to 10% of its operating profit without an upper limit, while the Samsung Electronics union is demanding 15% of operating profit and has raised the possibility of a strike. With arguments ranging from paying bonuses in local currency to stimulate regional economies to demands for sharing profits with society at large, the discussion has expanded to encompass debates on individual property rights and fair market order.

This controversy highlights the structural reality of the South Korean economy being dominated by a few 'export giants.' Samsung Electronics and SK Hynix, which are responsible for the majority of domestic semiconductor exports, are called 'pillars of the Korean economy' due to their significant share in KOSPI market capitalization, listed company operating profits, and R&D and facility investments. The tendency for these companies' performance to correlate with macroeconomic fluctuations is evident in their projected operating profit figures for 2024 and 2025. SK Hynix is estimated to achieve 97 trillion won in sales and 47 trillion won in operating profit by 2025, while Samsung Electronics posted 333 trillion won in sales and 43 trillion won in operating profit for 2025. Combined, the annual operating profits of these two companies alone reach approximately 90 trillion won, which is nearly half of the total operating profits of all listed companies in South Korea (228 trillion won).

The concentration of profits in specific companies exacerbates income disparity between businesses. Large export-oriented corporations experience more rapid growth, while smaller export firms, domestic businesses, and self-employed individuals lag relatively behind. Changes are also occurring within companies, with a declining trend in the labor share of income. In 2023, SK Hynix's labor share of value added was about 63%, but it is projected to fall to approximately 46% in 2024 as the growth rate of value added fails to keep pace with that of labor costs. This suggests that a significant portion of newly created value has flowed to capital.

Economic dependence on a few large corporations leads to macroeconomic-level risks. Booms and busts in the semiconductor industry directly impact South Korea's economic growth rate, investment, employment, and tax revenue, potentially destabilizing the entire national economy. Despite calls for industrial diversification, economic policymakers appear to be influenced by the investment decisions, compensation practices, and site selections of these large corporations. The success of regional balanced development policies, for instance, requires the cooperation of Samsung Electronics and SK Hynix.

As the macroeconomic influence of large corporations grows, there is an increasing possibility that society as a whole, including policy, media, and education, becomes subservient to their trajectory. The expansion of market dominance by large companies leads to increased political and social influence. When value added is concentrated in a few companies, it flows to capital rather than labor, which can extend beyond internal corporate distribution debates to influence industrial policy, and ultimately, politics and the media. This can create a cycle of buying power with money, changing rules favorably with power, and thus gaining more money and power. Large corporations are more likely to demand and receive 'special treatment' in areas such as laws, regulations, taxation, and labor policies. The economic power of giant corporations directly translates into political power.

To address the phenomenon of export giants, first, we must avoid approaching the performance bonus debate with the outdated frame of 'endless union demands.' We need to face the macroeconomic reality of concentrated large corporations and decelerating productivity, characteristics of 21st-century advanced capitalist market economies, and focus on finding solutions for changes in income distribution between and within companies, as well as for macroeconomic volatility. As seen in the controversy over Samsung Electronics' delayed investment in HBM, these issues are the result of complex factors including management's strategic judgment, failures in talent management, and rigid organizational culture.

Second, the roles of politics and institutions are crucial. The key is to control corporations so they cannot alter rules to their advantage. Examples like SK Hynix directly petitioning the President to relax the financial holding company separation regulations, citing large-scale investment needs, which then leads to policy discussions, demonstrate how large corporations' opinions can change regulatory frameworks. Coupang's lobbying in the United States also reveals the risk of companies directly intervening in the political arena to reverse domestic regulations using foreign political influence. Surveillance and sanctions against the abuse of dominance in technology, data, and platforms must be strengthened. Instead of relying on media dependent on large corporate advertising and sponsorships or academia funded by corporate research grants, institutional spaces must be secured for critical examination and oversight of large corporations through public and non-profit media and public policy research. The expansion of independent research institutions specializing in fair economy policies is also necessary.