Samsung mulls slowing chip production as strike risks loom

The largest workers' union at Samsung Electronics is threatening to go on a full strike from May 21 if its demands for bonus payments and other incentives are not met. The resulting loss in production may cost Samsung as much as $20 billion.

As the deadlock between management and union remains, Samsung Electronics is now reportedly considering contingency measures which include reducing chip production.

Chip manufacturing is done on highly sophisticated and very expensive machines. Ramping up or scaling down supply isn't as simple as pushing a few buttons.

The “warm-down” process include preemptive adjustments that must be made at least a week in advance. Stopping production midway isn't suitable and can cause significant losses. Samsung would thus need to limit new wafer input and shift product mix to higher-margin products like HBM to reduce losses as much as possible.

There was hope that talks this week between the union and management would bear fruit. However, the union had announced on Wednesday that the talks had fallen through and no agreement was reached. The union remains adamant that it more than 40,000 workers would go on strike if Samsung doesn't meet the demands by May 21.

The Korean government is also providing active assistance to ensure that a strike can be avoided, as it would also have significant consequences for the country's economy, as Samsung is one of the leading global suppliers of memory chips. Any production hit during a global memory super cycle would result in billions in lost revenue to not just the company but also the government.