Samsung, SK Hynix Face Profit Risks if Chips Act Forces Cultural Shift
Samsung's work culture may be holding it back. | Credit: Pexels.
- South Korea is considering implementing a special Chips Act, which would abolish the national cap on semiconductor companies’ working hours.
- The move comes as Samsung has reportedly looked to explore a change in its working culture amid criticism of long work hours.
- Samsung reported its semiconductor division suffered a major decrease from its previous quarter.
South Korea’s ruling party has proposed a national Chips Act to support the country’s semiconductor industry and remove a cap on working hours after Donald Trump threatened to scrap federal subsidies to its biggest chip makers.
The move could potentially risk profit losses to the country’s leading semiconductor companies, including Samsung and SK Hynix, which have long been competing with differing workplace cultures.
South Korea Proposes Chips Act
South Korea’s ruling party put forward the special chips act on Monday Nov. 11, The Korea Times reported .
South Korean President Yoon Suk Yeol warned last week that Trump’s threat of tariffs on Chinese imports could cause Chinese rivals to lower their prices, leaving Korean firms uncompetitive in the market.
The act would provide semiconductor manufacturers with subsidies and also lift the national cap on a 52-hour working week.
Lawmakers in South Korea said that giving subsidies to Korean companies to boost their production will help them fend off challenges and competition from China, Japan, Taiwan, and the U.S.
Samsung’s Corporate Culture
The news comes just weeks after Jun Young-hyun, Samsung’s semiconductor chief, reportedly planned several meetings to explore a cultural shift in the company before the end of the year.
However, a lift on the national working hour cap could derail these potential plans as the company may need to take advantage of the extra workforce to stay ahead of potential competition.
Samsung’s semiconductor business, which was once a main driver of its profits, has faced substantial declines alongside criticism of its work culture and long working days.
According to employee reports , workers are often expected to work long hours, and a top-down management style leaves little room for open communication or innovation from lower-level staff.
In April, following the crisis declaration, the company ordered a six-day workweek for all its executives. Samsung said it aimed to “inject a sense of crisis” among workers and raise its bottom line.
Executives at the South Korean company were given the option to work overtime on either Saturday or Sunday.
In August, Jun warned employees in a memo that Samsung risked getting caught in a “vicious cycle” if it didn’t revamp its workplace culture.
“We need to rebuild the culture of fierce debate that is unique to semiconductors,” the chief wrote .
“If we rely on the market without restoring fundamental competitiveness, we will be stuck in a vicious cycle that will repeat last year’s situation,” he added.
SK Hynix’s Lead Under Threat
Unlike Samsung, SK Hynix’s work culture has been heralded for encouraging innovation and knowledge-sharing among employees.
This has coincided with its extremely high revenue, which the company reported had grown 94% year-on-year in the third quarter of 2024.
However, with the potential introduction of a special Chips Act, the work culture that has facilitated so much growth may have to slip into something more typical of South Korean firms.
The lifting of South Korea’s national working hour cap could incentivize the company to put employees to work for longer, possibly needing to crunch more to match potentially low prices from Chinese rivals.
In a blog post on its website, an SK Hynix employee wrote that while they “sometimes have to work overtime to meet short deadlines,” the company runs a Happy Friday program, meaning employees get “rewarded with a day off if [they] do work regular overtime.”
Samsung’s Falling Profits
In October 2024, Samsung reported its semiconductor division suffered a 40% decrease from the previous quarter to 3.86 trillion.
Samsung said the performance decrease was due to reduced “reversal of inventory valuation loss compared to the previous quarter, one-time expenses such as the provision of incentives, and currency effects due to a weak dollar.”
In the first quarter of 2023, Samsung reported a 96% year-on-year drop in operating profit – marking its first reported loss in 14 years. Following the loss, the company said it would make a “meaningful” cut to chip production following its weak sales and profits.
As the loss streak continued, the company declared a “chip crisis” earlier this year when it replaced its former semiconductor chief for Jun.
Samsung recently made a rare public apology for its weak performance, claiming that its management would “take the lead in overcoming the crisis.
Samsung Denies Planning Switch to Chip-Making Method Favored by Rival SK Hynix
