Debate grows over semiconductor bonuses

 

Lee Hyun-sang

  The author is a columnist at the JoongAng Ilbo.   

      Performance bonuses at SK hynix have become a major topic of conversation among office workers in Korea. After controversy last year, the company pledged to allocate 10 percent of its operating profit to bonus payments, removed any cap and committed to maintaining the system for a decade. With the semiconductor sector enjoying an extraordinary boom, some forecasts suggest annual operating profit could reach 250 trillion won ($170.1 billion), which would translate into average payouts of about 700 million won for each of the company’s roughly 34,500 employees. There are even speculative claims that next year’s bonuses could approach 1.3 billion won per employee. While such projections may be overly optimistic, they have stirred both envy and frustration among workers.

 

The atmosphere at rival Samsung Electronics has also grown tense. Labor unions are demanding bonuses equivalent to 15 percent of operating profit and are prepared to strike if their demands are not met. Outside the company, however, public sentiment is less sympathetic. One-person protests have appeared near the company’s headquarters, criticizing what some see as excessive demands. Compensation figures reaching hundreds of millions or even billions of won remain unfamiliar to many. While performance-based pay can boost productivity and morale, the scale and structure now being discussed raise questions about whether they are appropriate.

  Economist Robert H. Frank of Cornell University has argued that people tend to overestimate headwinds and underestimate tailwinds when explaining success. Rather than acknowledging good fortune, individuals are more inclined to credit their own effort and ability. His book “Success and Luck: Good Fortune and the Myth of Meritocracy” (2016) examines this tendency. The insight helps frame the current debate, as extraordinary rewards can obscure the broader conditions that made such outcomes possible in the first place.

  The rapid rise of generative AI since late 2022 has acted as a powerful tailwind for the semiconductor industry. SK hynix, once considered an underdog, spent more than a decade investing heavily in high bandwidth memory, or HBM, a technology long seen as niche. Its current performance is clearly the result of sustained effort. But it is equally difficult to deny the role played by the sudden and unexpectedly strong surge in AI demand. Strategic misjudgments by established competitors also worked in its favor. Amid expectations of massive bonuses, it is reasonable to ask how much of this success reflects capability and how much reflects favorable conditions.

 

An even more important issue concerns the distribution of rewards. SK hynix has announced that bonuses will be paid over three years in an 8:1:1 structure, but they remain largely cash-based. By contrast, global technology companies such as Nvidia, Google and Apple provide a significant portion of compensation in stock, often in the form of restricted stock units. These are typically vested over several years, linking employee incentives to long-term corporate growth and shareholder value. This approach differs fundamentally from systems that distribute short-term gains primarily in cash. The contrast highlights differing views on whether rewards should emphasize immediate outcomes or sustained performance.

  Employees are not the only stakeholders entitled to share in corporate success. Last year, SK hynix returned 2.1 trillion won in cash dividends to shareholders, less than half of the estimated 4.7 trillion won allocated to employee bonuses under the 10 percent pledge. If Samsung Electronics were to match its rival’s bonus levels, total payouts to employees could significantly exceed dividends to shareholders. This raises concerns about the balance of capital allocation. Excessive bonuses risk placing strain on the company’s growth engine. While allocating 10 percent of operating profit to bonuses may be tolerated during periods of rising earnings, it could become contentious if profits decline, potentially sparking debates over shareholder value.

  The performance of semiconductor firms does not emerge in isolation. Government support has played a role, including expanded tax credits for facility investment, policy financing and infrastructure for electricity and water provided by national and local authorities. Consumers who have absorbed higher prices for semiconductor-related products are also part of this ecosystem. These factors suggest that corporate success is embedded in a broader network of support and contribution.

 

Corporate profit distribution must consider broader social acceptance. This is especially true for companies often described as national champions or industries seen as central to the economy. Investor Warren Buffett once observed that someone sits in the shade today because someone planted a tree long ago. The current semiconductor boom is the result of past generations’ efforts, as well as sustained national and social support. Sharing the rewards of success is important, but so is ensuring that future generations inherit a system capable of sustaining growth.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.