Seoul, Korea: If you’re working at SpaceX in the States or chip-makers Samsung and SK Hynix in South Korea, you’ve struck it rich.
At rocket launcher SpaceX, the Elon Musk-founded company, 4,400 employees became instant millionaires from the company’s initial public stock offering. They had received shares when the firm was private. Even with the shares having retreated to their IPO price of $150, 400 employees have shares worth over $100m.
Shares were allocated based on type of job and years of service. Most of the lucky SpaceX workers reside in California and Texas.
Here in South Korea the windfall impacts 4,400 unionized employees at Samsung, and also at SK-Hynix, the principal manufacturers of high-bandwidth memory chips vital to artificial intelligence (AI).
These workers are receiving the equivalent of $400,000 to $500,000 each in profit-sharing agreements that resulted from months of negotiations and threatened strikes. The payouts are huge when considering that a top-rated Korean tech worker earns about $52,000 a year.
The deals have triggered resentment, and are fiercely controversial within the country’s left-of-centre government that campaigned on reducing income inequality.
The bonuses have also sparked fury among trade unions that complain that Samsung chip employees are winning, while unionised workers at the conglomerate’s other divisions are left out. Profit-sharing is to be a multi-year occurrence. Both companies have agreed to pay chip employees ten percent of annual profits.
The controversy over the super-generous payouts reveals how the AI boom (and bubble?) is ricocheting around the world.
Dominate
Currently, three companies dominate the ultra-fast, 3D-stacked DRAM technology critical for AI computing. Those firms are Hynix with a 61% global market share, Samsung with 17% and America’s Micron with 21%. Nvidia and Google are the biggest buyers, and the Korean chips are primarily exported to China, Taiwan and the US.
Samsung has 113,000 South Korean employees. In addition to chips, the company is a huge producer of high-end smart phones, televisions and other electronics. But only the chip unit, with a separate union, is getting the windfall. Other employees will receive bonuses of $4,000 this year, while chip workers get 100 times that amount.
As to the 20,000 Samsung employees in Texas, apparently they get only a modest bonus or nothing.
Samsung’s chip division lost money in 2023, meaning that the company’s other units bailed out the chip division. Now chips have roared back with record profits that account for 90% of the conglomerate’s overall profit.
Shouldn’t this wealth be shared? Some analysts fear that the fairness controversy and citizen anger could tear Samsung apart.
SK-Hynix and Samsung each have market capitalizations exceeding $1 trillion, and are the crown jewels of Korean industry.
Economically, South Korea is doing well with GDP growth expected to be 2.6% this year. However, inflation is at a two-year high and the central bank worries that the chip bonuses could trigger an inflationary surge. There’s also concern about a property price boom.
Optimism is pervasive
But optimism is pervasive. The Korean stock market was the world’s best performer last year, and is up a stunning 100% so far this year.
The AI boom is indeed producing unparalleled wealth. The SpaceX IPO has propelled Elon Musk into the stratosphere of being the world’s first trillionaire. In the US and in South Korea, AI is producing uneven wealth that is perhaps akin to the gilded age of the 1890s and early 1900s.
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