Samsung Biologics, the world's largest contract drug manufacturer, is facing a critical challenge as wage negotiations with its labor union have broken down despite government mediation.
The company is currently experiencing its first-ever general strike, which has already led to estimated losses of around ₩150 billion. This situation is particularly significant because it's happening at a time when the company's manufacturing plants are operating at full capacity to meet soaring global demand. The strike raises serious questions about the reliability of its supply chain, a key factor for its global pharmaceutical clients who depend on timely production of crucial medicines, including treatments for cancer and HIV.
Several factors led to this point. First, the union, backed by a strong 95% strike-approval vote, initiated partial work stoppages in late April. This escalated to a full general strike in early May after a court ruling allowed industrial action in early-stage production processes. Second, the union's demands are substantial—a nearly 14% wage hike plus a large bonus—which is significantly higher than South Korea's current inflation rate of around 2.2%. This wide gap has made finding a middle ground difficult. Third, a recent change in labor law, known as the 'Yellow Envelope Act,' has provided unions with broader protections for industrial action, likely emboldening their position.
This internal labor dispute is unfolding against a backdrop of major shifts in the global pharmaceutical landscape. The U.S. has passed the 'BIOSECURE Act,' which is expected to restrict federal contracts with certain Chinese biotech companies. This policy creates a major opportunity for non-Chinese manufacturers like Samsung Biologics to win over new clients who are looking to diversify their supply chains away from China.
Therefore, the company finds itself at a crucial crossroads. The breakdown in talks creates a significant risk to its operational certainty, potentially damaging its reputation for reliability. At the same time, the certainty of demand for its services is increasing due to global geopolitical shifts. How Samsung Biologics navigates this dispute will not only determine its short-term financial performance but also its long-term position as a leader in the global biopharmaceutical industry.
- CDMO (Contract Development and Manufacturing Organization): A company that provides comprehensive services from drug development through to drug manufacturing on a contract basis for other pharmaceutical companies.
- BIOSECURE Act: A U.S. law aimed at preventing federally funded medical providers from using biotech equipment or services from designated 'biotechnology companies of concern,' primarily targeting certain Chinese firms.
- Work-to-rule: A form of industrial action where employees do no more than the minimum required by the rules of their contract, and precisely follow all safety or other regulations. This often causes a slowdown in operations.