The semiconductor industry’s bonus conflicts are giving rise to a new solution: long-term equity compensation tied to corporate value. With one-time cash bonuses repeatedly triggering labor-management tug-of-war and encouraging the departure of key talent, experts are calling for a shift toward long-term incentives such as restricted stock units (RSUs).
Hong Soon-won, a managing director at Human Consulting Group (HCG), identified this year’s bonus controversy in South Korea’s semiconductor industry as a prime example of the limitations of cash-centric compensation systems in a report titled “Transition to Long-Term Equity Compensation to Secure Talent Competitiveness and Overcome Short-Term Performance-ism,” released on the 3rd.
SK Hynix agreed to pay bonuses amounting to 3,264% of base salary based on record earnings, but the turmoil surrounding the payout has not easily subsided. The tentative agreement failed to clear the threshold of the production workers’ union. The deal, which included a 6.3% wage increase and payment of 40% of excess profit sharing (PS) in cash and 60% in company stock, was rejected with 50.08% (7,535 votes) against and 49.92% (7,510 votes) in favor — a margin of just 25 votes. Voter turnout reached 93.81%.
Samsung Electronics walked a similar path. The semiconductor (DS) division union threatened a general strike demanding expanded bonuses and removal of payout caps, but labor and management reached a tentative agreement just one day before the strike was set to begin, using 10.5% of business performance as special management performance bonus funding. A strike that was expected to draw up to 48,000 participants was narrowly avoided.
The conflict has spread beyond borders. Micron’s union at its Taoyuan and Taichung facilities in Taiwan is pursuing a strike if the company does not overhaul its bonus system. More than 80% of the roughly 10,000 union members voted in favor of a strike in an internal survey. The union is demanding a one-time additional bonus equivalent to 83 months of salary for fiscal year 2026, and from fiscal year 2027, quarterly bonus payments funded by 15% of operating profit. The benchmarks cited were Samsung Electronics and SK Hynix.
Behind this chain of conflicts lies the semiconductor supercycle. An analysis by the Tax Journal of semi-annual reports from 2,266 December-closing listed companies found that corporate tax provisions in the first half of this year reached 86.5746 trillion won (approximately $63.6 billion), up 522.5% year-over-year. Of the 72.6666 trillion won (approximately $53.4 billion) increase, approximately 92.6% came from just two companies: Samsung Electronics and SK Hynix. The two companies’ first-half corporate tax expenses were 31.2623 trillion won (approximately $23.0 billion) and 38.8311 trillion won (approximately $28.5 billion), respectively, totaling approximately 70.0934 trillion won (approximately $51.5 billion).
The surge in operating profit is even steeper. Samsung Electronics posted first-half operating profit of approximately 134.6467 trillion won (approximately $99.0 billion), while SK Hynix recorded approximately 91.9035 trillion won (approximately $67.6 billion). Expanded AI data center investment and rising demand for high-bandwidth memory (HBM) drove semiconductor prices and shipment volumes higher simultaneously.
The problem is that these accumulated cash bonuses become the baseline for comparison the following year. In the report, Hong noted, “Competing in the talent war through cash increases alone is the most expensive and least sustainable strategy,” adding that “cash-centric bonus competition can become a burden for both companies and employees.” A large lump-sum payment received at once can actually serve as a trigger for job changes or early retirement.
The alternative proposed in the report is RSUs. Under this approach, company shares are granted to employees who meet certain tenure or performance conditions, with the core objective of linking individual compensation to the company’s mid- to long-term performance to encourage long-term retention.
South Korean companies are already clearly shifting from stock options to RSUs. Stock option grants declined from approximately 2.68 trillion won (approximately $2.0 billion) in 2021 to approximately 960 billion won (approximately $705.7 million) in 2023. Meanwhile, among 353 stock payment commitments at large business groups, RSUs accounted for the largest share at 188.
The eligible population is also expanding from executives to regular employees. Hanwha Group expanded RSU eligibility to team-leader level starting in 2024, and among 1,116 team-leader-level employees who could choose between cash bonuses and RSUs, 88% selected RSUs. Samsung Electronics also decided to pay the entire after-tax amount of its special management performance bonus in company stock. One-third of the granted shares can be disposed of immediately, while the remainder can be sold after one year and two years, respectively.
However, equity compensation is not a panacea. It takes a long time before actual compensation is received, and if the stock price falls, the value of the compensation declines as well. Another drawback is that taxes are imposed at the time shares are received without any separate cash inflow, potentially increasing the burden on employees.
Sophistication in plan design is also a challenge. Among 82 listed companies that disclosed equity compensation, only 11 applied performance-linked conditions. A significant number of companies set continued employment for a certain period as the sole payment condition, which can be expected to encourage retention but has limitations in directly linking compensation to improvements in corporate value or business performance.
Hong emphasized, “Companies must go beyond simply adopting RSUs and carefully design performance-linked conditions and long-term holding mechanisms. Equity compensation funded by treasury shares does not dilute existing shareholders’ stakes unlike new share issuance, and when designed alongside share retirement, it can be compatible with shareholder returns. The key is aligning compensation and shareholder value in the same direction.”
He added, “Equity compensation may offer lower immediate satisfaction than cash payments, but what matters is that it aligns the enhancement of company value with the maximization of individual compensation value. Companies must sufficiently persuade employees that as corporate value rises, their compensation value grows as well.”
Foreign media are also interpreting this conflict as a profit distribution issue stemming from the AI boom. Reuters, referring to Micron’s labor dispute, reported that it “brings to mind the labor-management confrontation that occurred at South Korea’s Samsung Electronics.” Barron’s, a U.S. investment media outlet, assessed that “while investors have enjoyed ample fruits of the memory semiconductor boom, more parties are now demanding their share of the pie.”