Both leading stocks in the storage industry, Samsung Electronics significantly lags behind SK Hynix! The strike crisis has become the biggest drag, with profits at risk of being eroded and operations being forced to be interrupted.

On May 4th, the South Korean KOSPI index closed higher by 5.12% at 6936.99 points, reaching a historic high. Leading stocks in the storage chip sector performed exceptionally well, with SK Hynix rising by 12.5% and Samsung Electronics rising by 5.44%, both setting record high closing prices. The strong demand for artificial intelligence (AI) data centers being built by large tech companies has led to a limited supply of storage chips and raised prices for high-end and ordinary storage chips. Samsung Electronics and SK Hynix have both benefited from this continued growth trend in the global storage chip market. However, Samsung Electronics' stock price has noticeably lagged behind SK Hynix. Data shows that Samsung Electronics' stock price has risen by about 94% so far this year, while SK Hynix's stock price has risen by about 122%, with a gap of 28 percentage points between the two. The divergence in their stock prices began last month. Samsung Electronics' union held a rally on April 23rd, demanding a larger share of the profits from AI and threatening to go on an 18-day strike starting from May 21st. The pressure the strike threat brings to Samsung Electronics may further widen the stock price gap between them and SK Hynix. The dispute between Samsung Electronics' management and employees has raised concerns among more analysts about its profit prospects, especially after SK Hynix reached a landmark agreement last year to increase its bonus payouts. Samsung Electronics was already lagging behind in the highly profitable High Bandwidth Memory (HBM) chip business compared to SK Hynix, and this labor dispute poses a challenge to their efforts to recover. Stanley Tang, Senior Portfolio Manager at Sumitomo Mitsui DS Asset Management, said, "People are still bullish on AI-driven high bandwidth memory demand, but concerned about the potential strike at Samsung Electronics." He pointed out that with the share prices of companies like MediaTek and Macronix Semiconductor rising by nearly 10%, "only Samsung is falling behind." Samsung Electronics' financial report for the first quarter showed the company achieving revenue of 133.9 trillion Korean won, a 69% year-on-year growth and a 43% quarter-on-quarter growth. The semiconductor business division generated revenue of 81.7 trillion Korean won, an 86% increase quarter-on-quarter. The storage business became the undeniable core contributor to Samsung Electronics' first-quarter performance. Statistics show that this is the first time the revenue from the semiconductor business division accounted for more than 50% of the group's total revenue. The company's semiconductor business division mainly includes two categories: storage chips and wafer foundry operations. In the first quarter, revenue from storage chips was 74.8 trillion Korean won (an increase of 101.62% quarter-on-quarter), while revenue from wafer foundry operations remained at 6.9 trillion Korean won (unchanged quarter-on-quarter). The profit performance was even more impressive. In the first quarter, Samsung Electronics' overall operating profit was 57.2 trillion Korean won, a 184.6% increase quarter-on-quarter and a 756% increase year-on-year. The operating profit for the semiconductor business division in the first quarter was 53.7 trillion Korean won, compared to 16.4 trillion Korean won in the fourth quarter of 2025, representing a more than 2-fold increase quarter-on-quarter. However, the huge profits have not benefited frontline employees. The Samsung union is currently demanding that the company allocate 15% of its annual operating profit to bonuses, and has threatened to launch an 18-day strike from May 21st to June 7th if their demands are not met. The union had previously rejected the management's proposal to allocate 10% of the operating profit for bonuses and a 6.2% raise. Park Sooncheol, Chief Financial Officer of Samsung Electronics, stated in last week's earnings conference call that the company "is handling labor issues in accordance with the law and regulations and will continue to prioritize dialogue with the union to reach a friendly resolution." He added, "Even in the event of a strike, the company plans to respond within the legal framework with a dedicated team and response system to minimize production disruptions." The serious labor dispute facing Samsung Electronics may impact the already tense global storage chip supply. A large-scale strike by about 40,000 Samsung employees on April 23rd led to an 18.4% decrease in storage wafer production capacity and a staggering 58.1% drop in wafer foundry production capacity. This strike has shown that even in highly automated storage production lines, the absence of 40,000 people can still cause nearly one-fifth of production capacity loss, and labor-intensive foundry production lines are even more severely affected. If routine semiconductor equipment installation and maintenance work is suspended for a long period, it may take twice as long to resume normal operations. This means that if the union does carry out an 18-day strike, Samsung Electronics may need up to 36 days (more than a month) to fully restore normal production capacity. This will undoubtedly severely impact Samsung Electronics and even the global semiconductor supply chain. Faced with the looming threat of a strike and potential operational disruptions in the future, senior management at Samsung Electronics is even considering the possibility of splitting off the semiconductor business division. However, divesting the most profitable semiconductor business division may fundamentally resolve internal disputes over compensation within the group, but it is highly likely to result in a loss of company value, a drop in stock price, and is certain to provoke strong backlash and resistance from the group's shareholders. Analysts at Citi Group, led by Peter Lee, lowered the target stock price for Samsung Electronics from 320,000 Korean won to 300,000 Korean won on April 30th. They stated that while they see Samsung Electronics as a long-term beneficiary of the storage market growth, "the provisions made for potential bonuses due to intensified strikes may erode its profits." In contrast, to ease its own labor tension, SK Hynix reached an agreement with the union last September to allocate 10% of the annual operating profit to a bonus pool, avoiding a strike and possibly setting a precedent for the South Korean tech industry. SK Hynix's financial report showed a net profit of 40.33 trillion Korean won in the first quarter, significantly exceeding analysts' expectations of 29.39 trillion Korean won; operating profit was 37.61 trillion Korean won in the first quarter, also higher than market expectations. The average selling price of DRAM in the first quarter increased by about 60% compared to the fourth quarter of last year, while the average selling price of NAND increased by about 70%. SK Hynix stated that the strong demand for server memory continued to offset the weak performance in the personal computer and smartphone chip sectors, driving overall market growth. In the server chip sector, the demand foundation for DRAM and NAND is expanding. SK Hynix expects the favorable pricing environment to continue in the short term; DRAM shipments in the second quarter are expected to increase by a high single-digit percentage quarter-on-quarter, while NAND shipments are expected to increase by about 15% quarter-on-quarter. Analysts at Bank of America Securities, led by Simon Woo, wrote in a research report that they have assumed Samsung Electronics will start setting aside reserves for special employee bonuses in the second quarter, while "Samsung's potential union strike may also bring a more favorable chip pricing environment to SK Hynix," prompting the bank to raise its target price for SK Hynix.