Samsung Spin-Off Talks Surface Amid Rising Labor Tensions

Samsung is seeing growing tensions over a labor dispute regarding the current performance bonus system. In the midst of this, discussions of a possible spin-off have begun to surface. The idea is to separate the company’s semiconductor and consumer electronics businesses into different entities.

Samsung’s DS and DX split idea is under discussion

Samsung labor union demands 15% of the company’s operating profit as performance bonuses, with no cap. Early estimates suggest the Korean firm could see about 305 trillion won in operating profit this year, meaning demand of around 45 trillion won. The company has two main divisions, DS (Device Solutions) and DX (Device eXperience), under a single corporate structure.

This year, most of the earnings may come from the DS division, so employees in the DX division will also enjoy the same level of benefits, even if the latter performs relatively less well. If the divisions split into two separate legal entities, each could receive a different performance bonus. As a result, DX employees may receive smaller bonuses compared to DS employees.

Korean media reports that a senior Samsung official recently mentioned the possibility of a spin-off during talks with the government. However, the main barrier is the appraisal rights. In a physical spin-off, shareholders don’t automatically get shares in the new company. Moreover, it could create huge financial pressure. Industry watcher believes a physical spin-off is practically impossible.

The DX division has played a key role in supporting overall performance during difficult periods. In 2023, the DS division posted a loss of 14.9 trillion won. Thankfully, the Mobile eXperience unit (part of the DX) earned about 13 trillion won in operating profit, helping stabilize the company.

So, it appears unfair to spin off, particularly at a time when the DS division is seeing skyrocketing profits due to growing memory demand. We’ll let you know how the discussion moves forward in the coming months