Samsung implements 64-hour workweek as falling sales usher crisis mode

Samsung Electronics rolled out a 64-hour workweek for the R&D and smartphone teams to combat declines in sales while workers strike over wages.

Samsung Electronics Executive Chairman Lee Jae-yong arrives at a court in Seoul in February. The Samsung chairman was acquitted of charges of stock manipulation and auditing violations related to the 2015 merger of Samsung C&T and Cheil Industries, which was allegedly conducted to transfer control of the conglomerate to the third-generation heir. [YONHAP]

Samsung Electronics is rolling out a 64-hour workweek for its semiconductor research and development (R&D) and smartphone teams as the tech giant enters emergency mode to address its weak earnings.

The latest effort to sharpen its edge follows Samsung's previous decision to implement a company-wide six-day workweek policy for executives in April. The company is once again struggling to secure a footing amid a growing sense of crisis — three decades after the late Samsung Chairman Lee Kun-hee called for a radical change in management to overcome a global slump. The 64-hour policy currently applies to two teams, according to industry insiders: the R&D team from the Device Solutions (DS) division, which is responsible for Samsung’s chip business, and some from the mobile business division, Mobile eXperience.

Korea’s labor laws cap working hours at 52 hours per week — 40 regular hours with 12 hours of possible overtime — but there are exceptions.

Certain occupations involving R&D or those that strengthen national competitiveness can at times implement 64-hour workweeks, given the workers’ consent and approval from the Ministry of Employment and Labor. Under these circumstances, workers can work up to 64 hours a week for a maximum of three months without capping their hours at eight per day or 40 per week.

Employees of the aforementioned Samsung Electronics divisions have reportedly signed contracts agreeing to the extended hours and are now working 64 hours per week.

Late Samsung Chairman Lee Kun-hee declares his plan for “new management” at a executive meeting at a Frankfurt hotel in 1993. [SAMSUNG ELECTRONICS]

Friday was the 31st anniversary of Lee's “New Management Initiative” speech that was delivered in Frankfurt on June 7, 1993.

“Should things go wrong, it is possible that Samsung will enter the terminal stages of cancer,” the late chairman said while underscoring the need to shift toward management that prioritized quality over quantity. He strongly emphasized the importance of the former, promising to interrupt production lines to meet standards; and also drastically changed internal operations by improving the company's system for human resources, building infrastructure for information and implementing a more creative organizational structure. Samsung Electronics became a global company on the back of such decisions.

Both Samsung Electronics insiders and outsiders evaluate the company’s current climate as similar to that of the era in which the former’s chairman declared new management.

Samsung Electronics’ chip division, which had been leading the company’s sales, recorded 15 trillion won ($11 billion) in losses last year. Some see it as Samsung Electronics’ being too late to the high bandwidth memory (HBM) chip game compared to its rival manufacturers, as indicated by the latest controversy over the chips' alleged failure to meet Nvidia’s quality standards.

In the mobile business, the company lost its No.1 spot in global smartphone shipments to Apple last year with Chinese players also on its tail. Its quarterly operating profits from the television and home appliances division were only around half of LG’s in the first quarter of this year.

Samsung's management, as a matter of fact, has effectively entered emergency mode. Its expansion of the six-day workweek for all executives is a prime indicator. Executives from Samsung Electronics' development and support divisions had already been voluntarily working six days a week, but other divisions, as well as Samsung affiliates, are now expected to work an extra day. Jung Young-hyun’s recent appointment as head of Samsung Electronics’ DS division is also interpreted to be indicative of the crisis in management.

Samsung Electronics' unionized workers stage a protest on Friday at the tech company's office in southern Seoul as they launch the first ever walkout in the company’s history. [YONHAP]

It was under these circumstances that Samsung Electronics’ largest labor union staged the first strike in the company’s history on Friday. The National Samsung Electronics Union (NSEU) demanded that the company “implement a fair and transparent wage system and pay incentives based on operating profits” while announcing their intent to strike on May 29. The union asked its members to use a day of annual leave on Friday, with the intent to take collective action for two consecutive days starting from Memorial Day, a public holiday. Around 28,400 Samsung Electronics workers are members of the union, constituting around 22 percent of the company’s total work force. Membership did not even amount to 10,000 people last year, but the number rapidly increased as dissatisfaction over bonuses grew.

The integrated labor union of four Samsung affiliates, meanwhile, criticized the NSEU’s strike, saying it had been held “not with the intention to improve the working conditions of employees but in an attempt to lay groundwork to join a higher level organization,” referring to the Korean Confederation of Trade Unions. A Samsung Electronics’ Device eXperience division employee affiliated with the integrated union claimed that the NSEU had inflated the union's membership numbers to fabricate working hour exemptions in a notice titled “NSEU’s misconduct” uploaded to the company’s community board.

“At the time when the ‘New Management Declaration’ was made, it seemed both executives and employees alike were united,” said an employee from Samsung Electronics’ financial division who wished to remain anonymous. “It’s unfortunate that the strike is happening at a time when the crisis should be overcome with efforts from the whole company.”

BY PARK HAE-LEE [kim.juyeon2@joongang.co.kr]