South Korea's two leading memory chipmakers are changing their bonus systems after posting record earnings. SK Hynix finalised a 2,964 percent payout rate for its profit-sharing bonus after announcing its best-ever results, paying incentives that exceeded annual salaries. Samsung Electronics is also reviewing ways to pay rewards beyond the cap on its excess profit incentive, which has been limited to a maximum of 50 percent of annual pay.

The expansion in rewards is underpinned by semiconductor performance. SK Hynix posted record annual sales of 97.1467 trillion won and operating profit of 47.2063 trillion won last year. Samsung Electronics also achieved its highest-ever quarterly results, with fourth-quarter revenue of 93.84 trillion won and operating profit of 20.0707 trillion won. For the year, it recorded revenue of 333.61 trillion won and operating profit of 43.6 trillion won. Both companies said expanding sales of high-bandwidth memory, or HBM, and rising demand for server memory drove results.

The two companies have decided to pay record-level incentives. SK Hynix runs a performance reward programme that pays out once a year using 10 percent of operating profit as the funding source through its profit-sharing bonus. A labour-management agreement abolished the previous payout ceiling of 1,000 percent, and this standard will be maintained for the next 10 years. Based on last year's figures, the bonus for a 100 million won annual salary would be calculated at about 148.2 million won. The company pays 80 percent of the individually calculated amount in the year of payment, and defers the remaining 20 percent by paying 10 percent each year over two years.

The industry expects the operating profit pool used to calculate the profit-sharing bonus to be about 4.5 trillion won. If productivity incentives paid twice a year are added, up to 150 percent for each half, the total incentive amount based on last year's performance rises to 3,264 percent.

Samsung Electronics has also begun reviewing its reward system. Under the current excess profit incentive, the company uses 20 percent of economic value added as the funding source and pays up to 50 percent of annual salary. In wage talks with its labour union held last month, management said it would keep the framework but review the possibility of additional rewards for outperformance within the funding range. It also gave all employees the option to receive 0 to 50 percent of their incentive, in 10 percent increments, in the form of company shares. If they choose a one-year holding condition, the company pays an additional 15 percent of the stock reward amount.

Semiconductor talent battle shakes bonus systems

As incentives grow, internal disputes are also emerging over distribution. Samsung Electronics management for the first time suggested it could apply different excess profit incentive payout rates between its memory business and foundry business within the DS division. This year, the payout rate for both businesses is the same at 47 percent.

The performance gap is large between the DS division, which handles semiconductors, and the DX division, which oversees mobile smartphones as well as TVs, home appliances and networks. In the fourth quarter alone last year, the DS division posted operating profit of 16.4 trillion won, while DX recorded 1.3 trillion won.

Behind the debate over competition in rewards is the issue of securing talent. SK Hynix sees securing and retaining key talent, alongside capital expenditure, as a core competitive factor as competition in AI semiconductors accelerates. TSMC, the top foundry company, also uses about 10 percent of operating profit as the funding source for incentives.

Within Samsung Electronics, the reward gap with SK Hynix is also driving change. The Samsung Electronics branch of the National Samsung Electronics Labor Union had 63,579 members as of Jan. 30, surpassing a majority of the company's workforce. The industry believes SK Hynix's abolition of its profit-sharing bonus cap spurred a large-scale membership increase among DS division employees. An industry official said, "The next-generation memory market is technically difficult, and securing skilled engineers is corporate competitiveness," adding, "Companies will also have little choice but to consider reward plans that go beyond existing calculation methods to prevent talent from leaving."