South Korea’s K-shaped economy where chip giants give out $1 million bonuses to staff

[Barnsley]

SEOUL - In South Korea’s booming chip sector, bonuses that bullish forecasts suggest could soon approach US$900,000 (S$1.15 million) are deepening concerns over widening inequality.

At SK Hynix, one-off payouts tied to the artificial intelligence boom are forecast to swell to multiples of earnings in traditionally high-income professions. The windfall illustrates the Bank of Korea’s concern that the tech bonanza will skew the economy “K-shaped” – where a few workers vault ahead while the rest languish on a downward slope.

It’s a phenomenon that was on display on April 23 in Seoul, when SK Hynix reported a fivefold jump in quarterly operating profit to a record 37.61 trillion won (S$32.4 billion). Less than half an hour later, the BOK said gross domestic product surged 1.7 per cent in the first quarter, led by tech exports, topping even the most bullish economist forecasts.

https://www.straitstimes.com/busine...ip-giants-give-out-1-million-bonuses-to-staff

 

[Barnsley]

In response!!

Samsung workers protest over huge pay gap with SK Hynix, threaten long strike

Should their demands not be met, they plan to strike for 18 days from May 21. Read more at straitstimes.com. Read more at straitstimes.com.

www.straitstimes.com

PYEONGTAEK, South Korea - Tens of thousands of Samsung Electronics workers rallied at a sprawling factory complex south of Seoul on April 23, venting their anger over compensation levels ahead of a planned lengthy strike that could disrupt AI chip production.

Union organisers put the number of protesters at 40,000, making the demonstration the largest to date for Samsung, which has long been known for its union-busting tactics but saw workers walk out for the ⁠first time in 2024.

Should their demands not be met, they plan to strike for 18 days from May 21. That could delay shipments to customers, push up chip prices further and benefit rivals.

 

[Barnsley]

https://www.channelnewsasia.com/bus...t-workers-protest-over-pay-union-says-6078796

SEOUL, April 24 : Samsung Electronics' production of foundry and memory chips at its facilities in South Korea dropped 58 per cent and 18 per cent, respectively, during the overnight shift on Thursday as unionised workers attended a protest demanding higher wages, the company's union said.

Many workers, who joined protest on Thursday at a factory complex in Pyeongtaek, south of Seoul, skipped the overnight shift from 10 p.m. Thursday to 6 a.m. Friday at the company's South Korean production facilities after the protest, according to the union.

Samsung's factories are scheduled to operate 24 hours a day on three shifts, the union said.

Samsung declined to comment.

 

[KevinK]

unionised workers attended a protest demanding higher wages, the company's union said.

Very interesting to see which way this goes in Korea. It looks like the union is asking for a removal of the bonus cap, similar to what SK Hynix has now offered their workers. We made a decision in the US starting in 1979 to allocate more of the spoils of increasing productivity to corporate profits and stock appreciation vs wage growth as compared to the muscular US post-WWII industrial period. The decision was reflected in tax policy, the treatment of unions (response to the air traffic controllers strike), the move from pensions to 401Ks and executive compensation.

 

[tooLongInEDA]

Very interesting to see which way this goes in Korea. It looks like the union is asking for a removal of the bonus cap, similar to what SK Hynix has now offered their workers. We made a decision in the US starting in 1979 to allocate more of the spoils of increasing productivity to corporate profits and stock appreciation vs wage growth as compared to the muscular US post-WWII industrial period. The decision was reflected in tax policy, the treatment of unions (response to the air traffic controllers strike), the move from pensions to 401Ks and executive compensation.

View attachment 4495

Interesting data there. Of course, there might be some non-salary compensation (stock options and similar) in the US which might make up some of the gap. But clearly not all and probably only a fraction. It would be very interesting to see this data for other countries (Korea, Japan, Germany, etc) to see if such a large gap between productivity and wages/salaries has emerged there too where stock-based compensation probably isn't a major factor and cultural norms are very different.

Also interesting that this data shows productivity continuing to grow strongly in the US (I assume this is measured across the economy as a whole and not just our technology segments). Sadly, it's certainly not growing (or hardly at all) this side of the pond across the whole economy.

 

[Xebec]

Interesting data there. Of course, there might be some non-salary compensation (stock options and similar) in the US which might make up some of the gap. But clearly not all and probably only a fraction. It would be very interesting to see this data for other countries (Korea, Japan, Germany, etc) to see if such a large gap between productivity and wages/salaries has emerged there too where stock-based compensation probably isn't a major factor and cultural norms are very different.

Also interesting that this data shows productivity continuing to grow strongly in the US (I assume this is measured across the economy as a whole and not just our technology segments). Sadly, it's certainly not growing (or hardly at all) this side of the pond across the whole economy.

A few other trends to consider with regards to the US data:

Since 1980, Employees have lost some major benefits/purchasing power outside of wages:
- Pensions are sharply down for private sector jobs in 2026 vs 1980 (though government pensions are up substantially), though partial offset by increasing 401K type plans (savings plans with company matching funds)
- The US (IMO) underreports inflation - it's a "basket" of goods that can be changed between years

But Employees received more compensation outside of wages:
- Stock compensation / RSUs have filtered down from executivecs only to at least some portion of 'non executive' employees
- Health insurance costs have greatly outpaced inflation, meaning in addition to wages - more is paid out now by employers than 1980.
- Grok says health insurance has gone from 3.7% to 7% of compensation from 1980 to 2010, and is stil rising
- Some companies offer tuition reimbursement, school costs have also greatly outpaced inflation

and Employees got more out of their wages:
- 1980 is a pivotal year in terms of "cost of money", interest rates were very high then (and most of the decade before), but shortly after the interest rate started to go down and stayed down. i.e. Inflation was in great flux betwen 1975 and 1985, but borrowing became substantially cheaper after about 1985.
- Federal income taxes decreased significantly since 1980
- (Almost?) Everything in tech has gotten vastly cheaper over time, and tech has become a larger portion of household expenditures
- In the US - oil and gasoline are far cheaper in 2026 than 1980 in terms of "gallons per hour-wage".

 

[blueone]

- The US (IMO) underreports inflation - it's a "basket" of goods that can be changed between years

A few friends and I were just discussing this issue. 3% inflation in the US is a joke. If you are a homeowner and a car owner, annual inflation is far higher than 3%. Exactly how much higher? We aren't government statisticians, but home, auto, and even liability insurance goes up by more like 10% per year, not 3%, according to our experience. Home maintenance inflation is far more than 3%. Probably more than 10%. Auto repair? Much more than 3%. Collision damage - much more than 3%, especially if you have an EV, which is one reason why auto insurance rates keep rising steeply.

The "basket of goods" definition is critical, and the current definition is in our opinion useless.

 

[KevinK]

there might be some non-salary compensation

I did a little deeper dive on this.
* first off, this chart is shows purely hourly wages (wage, non-supervisory) so it doesn’t reflect salaried / exempt employees.
* plus it 's not by sector, so we don't see the the tech sector. And even if we did, most of the tech sector is salaried
* and a substantial component of the tech community also includes equity participation (RSUs, options) so there is better participation in profitability of one's company via that route.

But now we're seeing a tech world where things are also becoming increasingly uneven - we're seeing a few superstars companies with superstar compensation for execs (like Musk's companies or Meta's new exec comp), plus superstar salaries for some. I'm watching the late 20-somethings scramble to go work for the "labs", Anthropic and OpenAI, which are currently offering eye-watering salaries and equity participation for people who come in with deep AI knowledge, while the rest of the tech jibs seem to be retrenching.

 

[KevinK]

The "basket of goods" definition is critical, and the current definition is in our opinion useless.

Agree - either the basket is off on content and weights vs our personal experiences or the incoming numbers on on price changes are are off. I just looked at the current "basket" and specifically the shelter / housing component. One challenge I see is that it blends owned and rental expenses (it has to). Tenant and household insurance is only 0.4% of the entire basket.

 

[Barnsley]

So we for or against the workers?

 

[blueone]

So we for or against the workers?

I'm a supporter of a market economy. If companies want to compete for engineers and scientists, like they do CEOs, I say let the games begin.

 

[KevinK]

I'm a supporter of a market economy. If companies want to compete for engineers and scientists, like they do CEOs, I say let the games begin.

I agree, though what I see worries me a bit for two reasons. The engineer / scientist packages for the 20-somethings are eye-watering ($5M/yr for AI seasoned individual contributors) , but far short of the corresponding CEO packages. Plus those benefits fall to a very narrow band of anointed ones, while many college STEM students are graduating into a market offering far fewer entry-level positions.

 

[blueone]

I agree, though what I see worries me a bit for two reasons. The engineer / scientist packages for the 20-somethings are eye-watering ($5M/yr for AI seasoned individual contributors) , but far short of the corresponding CEO packages. Plus those benefits fall to a very narrow band of anointed ones, while many college STEM students are graduating into a market offering far fewer entry-level positions.

Many big companies hired too many people for the past few years, so naturally there are reductions occuring. A market economy based on demand and meritocracy is the best known strategy for long-term success, but it can definitely lead to short-term dislocations and the perception of "anointed ones". I still wouldn't want any of the alternatives. I lived one once (a union job with a seniority-based contract). That experience made me the capitalist market economy meritocracy advocate I am today.

 

[swka]

Many big companies hired too many people for the past few years, so naturally there are reductions occuring. A market economy based on demand and meritocracy is the best known strategy for long-term success, but it can definitely lead to short-term dislocations and the perception of "anointed ones". I still wouldn't want any of the alternatives. I lived one once (a union job with a seniority-based contract). That experience made me the capitalist market economy meritocracy advocate I am today.

100%. It is the best known system we have

 

[Barnsley]

Many big companies hired too many people for the past few years, so naturally there are reductions occuring. A market economy based on demand and meritocracy is the best known strategy for long-term success, but it can definitely lead to short-term dislocations and the perception of "anointed ones". I still wouldn't want any of the alternatives. I lived one once (a union job with a seniority-based contract). That experience made me the capitalist market economy meritocracy advocate I am today.

Sadly network > merit

 

[blueone]

Sadly network > merit

That works for a while, but letting it get out of hand (like Intel did) results in disaster.

 

[KevinK]

A market economy based on demand and meritocracy is the best known strategy for long-term success

I’m all with you on the meritocracy, but I see that getting pinched off in a couple of ways in AI: It feels like not enough new grads are making it into those first jobs that give them the experience to show their merit, though maybe those are the ones that are dropping out and starting their own companies. And we’re not getting as much world-class talent from outside the US thanks to immigration fears and policy. But maybe we’ll see long term success as the system adapts.

 

[blueone]

I’m all with you on the meritocracy, but I see that getting pinched off in a couple of ways in AI: It feels like not enough new grads are making it into those first jobs that give them the experience to show their merit, though maybe those are the ones that are dropping out and starting their own companies. And we’re not getting as much world-class talent from outside the US thanks to immigration fears and policy. But maybe we’ll see long term success as the system adapts.

I agree on both points. In fact on the immigration point, I have never understood why the US can't figure out and implement a reasonable immigration policy. We need a guest worker program, and we need to make it easier for people who will add real value to achieve citizenship. It seems our policy has only two states: anything goes, and close the border. Both of these options are dumb.

 

[MKWVentures]

A few friends and I were just discussing this issue. 3% inflation in the US is a joke. If you are a homeowner and a car owner, annual inflation is far higher than 3%. Exactly how much higher? We aren't government statisticians, but home, auto, and even liability insurance goes up by more like 10% per year, not 3%, according to our experience. Home maintenance inflation is far more than 3%. Probably more than 10%. Auto repair? Much more than 3%. Collision damage - much more than 3%, especially if you have an EV, which is one reason why auto insurance rates keep rising steeply.

The "basket of goods" definition is critical, and the current definition is in our opinion useless.

The inflation is tracked by area (including health care, insurance, food, cars, housing) and those numbers are broken out.
Also, there are Non-government trackers that report out numbers as well. Some areas go up more, some less.

 

[Xebec]

That works for a while, but letting it get out of hand (like Intel did) results in disaster.

The US Congress is the perfect example of the antithesis of meritocracy...