SK Hynix union rejects wage deal by 25 votes, shares fall

SK Hynix's union rejected a wage deal by 25 votes, blocking a bonus shift toward company stock as the chipmaker weighs pay against a record buyback.

SK Hynix Inc. union members rejected a tentative wage agreement by just 25 votes, sending the memory-chip maker back to negotiations over a bonus plan that would shift 60 percent of profit-sharing pay into company stock.

The vote, reported by Yonhap News and confirmed by Reuters, leaves the cash-to-stock ratio of the profit-sharing bonus as the central issue, with a newly unified union making preservation of cash payments a priority, according to the reports.

Of 15,045 members who voted, 50.08 percent (7,535) opposed the deal and 49.92 percent (7,510) backed it, on turnout of 93.81 percent. The rejected agreement included a 6.3 percent base-pay increase and a profit-sharing structure paying 40 percent in cash and 60 percent in SK Hynix shares, of which 40 percent could be sold in the payment year and 20 percent deferred over two years.

The deadlock comes as SK Hynix juggles three claims on its AI-memory windfall: employee compensation, shareholder returns and tens of trillions of won in capacity investment. A day before the tentative deal, the company approved a record 40 trillion won ($28.6 billion) buyback and cancellation program, the largest ever by a South Korean listed company, and raised its shareholder-return commitment to more than 50 percent of cumulative free cash flow from 2025 to 2027.

Bonus Structure at the Center of the Dispute

The rejected deal would have moved employees much more heavily into SK Hynix stock just as the company seeks to align workers with its long-term earnings and share-price performance. Under the proposal, shares equivalent to 40 percent of the total bonus could be sold in the year of payment, while the remaining 20 percent would be deferred over two years at 10 percent annually. For the 2026 profit-sharing bonus due early next year, employees could have taken the immediately available stock portion in cash, allowing up to 80 percent of the first-year payment in cash.

The shift drew opposition from workers concerned about share-price volatility. Although SK Hynix shares have logged large cumulative gains this year on booming demand for high-bandwidth memory (HBM, the specialized chips used in AI accelerators), the stock remains nearly half its June 25 peak of 2,987,000 won. It traded down about 5 percent Tuesday to 1,584,000 won, underperforming the KOSPI, which fell roughly 2 percent.

The vote is the third such rejection in four years — tentative agreements were voted down in both 2023 and 2024 — but carries greater financial weight because bonuses have ballooned with earnings. Last year's agreement removed the previous ceiling on profit-sharing and set a formula allocating 10 percent of annual operating profit to the bonus pool for 10 years. Based on earlier estimates, the average 2026 bonus could reach about 779 million won ($547,000).

AI Memory Windfall Faces Three-Way Split

The dispute unfolds alongside an aggressive push to return cash to shareholders. SK Hynix plans to buy about 24.07 million shares, roughly 3.3 percent of outstanding stock, between Aug. 20 and Nov. 19 and cancel all of them, part of the 40 trillion won program that Nomura said could be followed by more shareholder-return measures. Investors initially welcomed the move, sending shares up 12.67 percent to 1.69 million won last Thursday after a 9.75 percent drop the prior session.

The company is also spending tens of trillions of won to expand HBM and advanced memory capacity, competing with Samsung Electronics in the AI memory market. The tension between compensation, buybacks and capital expenditure is likely to persist as long as the union and management remain at odds over how to split the profit-sharing pool.

SK Hynix shares, which have nearly halved from their June peak, trade with the market pricing in demanding expectations for the AI memory cycle. The labor deadlock adds uncertainty to a company already navigating volatile swings tied to HBM demand, with the cash-to-stock bonus ratio set to be the focus of the next round of talks. A prolonged dispute raises the risk of production disruption at a time when the company is a key supplier of HBM to AI chipmakers.

This article is for informational purposes only and does not constitute investment advice.