Samsung Electronics has a complex supply chain network in South Korea. It relies on subsidiaries it owns and controls as first-tier suppliers. Second-tier includes large component makers it depends on strategically. Third and fourth tiers are manufacturers and parts suppliers Samsung can replace if needed. The lowest tier includes small vendors competing on price. Samsung monitors workers closely to prevent unionization, though workers struggle for better health and associational rights. It pays high wages but exploits subcontractors, and production is flexible without minimum wages.

1. Samsung Electronics’ Supply Chain and Workforce in South Korea
Case Study on

2. Introduction to Samsung Electronics
● Samsung Group
○ Samsung Electronics is flagship company among 516 companies owned by the group
○ 195 full fledged Samsung Electronics subsidiaries - 50%+ ownership
○ 63 companies make component for Samsung Electronics subsidiaries
● Ownership
○ Korean Chaebols (South Korean Conglomerates)
■ Complex web structure of circular investment
■ Makes possible for Investor to control company without directly owning even 10% share
■ Lee Kun-Hee and his family own less than 2%

3. ● Revenue and Profit
○ 2008-2012 Samsung Electronics
■ 66% Increase in Revenue
■ 383% Increase in Operating Profit
○ 2008-2009 Crisis
■ Japanese Display companies
■ Nokia - Mobile
■ 50%+ operating profit of Samsung Electronics from Smartphones
○ Samsung Group’s 85% Operating Profit - Samsung Electronics and subsidiaries
■ Transaction with its subsidiaries are in favour of Samsung Electronics
■ Samsung Group’s other subsidiaries faced economic stagnation
○ Samsung Electronics revenue is 20% of South Korea’s GDP

4. ● Location
○ Majority Product produced in South Korea are not consumer product
■ Semiconductors, LCD panels
○ Consumer product production is limited to satisfy only domestic needs
○ Consumer Products are produced abroad
● Workforce
○ Total of 2,21,000 employees including those in subsidiaries at end of 2011
■ 1,00,000 South Korea
■ 41,000 China
○ 53% increase in 5 years

5. Samsung Electronics’ Domestic Supply Chain
The supply for Samsung Electronics is made on five layers. They are
● First Layer
○ Samsung Group Subsidiaries
○ They are separate companies but operate as single company based on Samsung Electronics’
business plan.
○ Irreplaceable
● Second Layer
○ Transnational Electronics Component Suppliers
○ Strategically Important due to sale and importance of product they supply
○ QualComm, 3Com
○ Irreplaceable

6. ● Third Layer
○ Samsung Electronics outsource manufacturing of parts it can produce itself
○ Low Cost, Production Capacity
○ May lose contract, if any problem with product quality or supply
○ Samsung Electronics at times support them, but it easily cut those that it deems to have lost
value from a business perspective
● Fourth Layer
○ Subcontractors which supply parts that Samsung Electronics can not manufacture itself
○ May lose contract, if any problem with product quality or supply
● Last Layer
○ Small and Medium size parts suppliers or Vendors
○ Frequently switched - Price Competition - Contracts are for a period of a week to few months
○ Price at which parts are supplied are determined by Samsung Electronics

7. Mobile Phone Supply Chain Hierarchy

8. Samsung Electronics’ Workers
● No Union Policy
○ It actively intervenes in formation of union even in its suppliers.
○ Union Participation in South Korea’s electronics industry is 3%
○ Careful workplace control and a thorough system of selective inclusion and exclusion
○ Closely monitors workers activity
■ Tapped their phone calls
■ Threaten their family
■ Tracking Device
○ Uses point person system to monitor movements towards union formation on day-to-day basis
■ Staff in labour management department
■ Labor management department supervisor
■ Head of the Labour management department

9. ● Wages
○ Highest Wage in Industry
○ Due to exploitation of subcontractors
■ Wages at subcontractors level is just above minimum legal wage
■ No union is formed at this level also
○ High Wage level in Automobile Industry, where Unions are common
■ Wages of worker at supplier's level is close to OEMs
○ Production level in Samsung can easily regulated as per demand and no minimum wage level
need to be paid in absence of union
■ Leads to large fluctuations in wage level
● Workers at subcontractors must do whatever Samsung Electronics demands to
ensure that the orders keep coming in

10. ● Employment Structure
○ Employs Young girls in production - High School Recruitment
■ Easy to Control
● Long Hour of Work
● Force to quit when old
○ Employs at subcontractor level are women in forties and fifties
■ No wage increase with experience
■ Work for 2-3 years
● Not much skill needed so new hire
● Workers try to find big companies for higher wage
○ In-house subcontractors

11. Struggle for workers’ health rights and freedom of association
● Occupational Health and Safety
○ Cancer, Nervous and Immune System, Psychological Disorders
○ Support for Health and Rights of People in Semiconductor Industry (SHARPs)
● Union Establishment
○ Samsung Labor Union recently joined Korean Confederation of Trade Unions-affiliated Korean
Metal Workers’ Union
○ Disciplinary Action taken

12. Reference
In the Belly of the Beast: Samsung Electronics’ Supply Chain and Workforce in
South Korea;Jiwon Han, Wol-san Liem, and Yoomi Lee Research Institute for
Alternative Workers’ Movements, South Korea