Samsung Electronics has successfully avoided a major labor disruption after reaching a tentative pay agreement with its largest union. The industrial action, which had been scheduled to commence this week, has been suspended while the union’s 48,000 members participate in a ratification vote set to conclude on May 27. This development provides a temporary reprieve for the tech giant, which currently plays a critical role in the global supply chain for artificial intelligence hardware.

The core of the labor dispute involved the allocation of performance bonuses tied to the recent surge in demand for AI-focused memory chips. Tensions rose when the company proposed significantly higher bonuses for employees in the memory chip division compared to those working on other electronics and less advanced semiconductors. Union representatives argued that this disparity unfairly penalized a large portion of the workforce, particularly as the company navigates intense competition from rivals like SK Hynix and Micron.

Financial stakes remain high, as Samsung recently reported a 750% year-over-year increase in operating profit for the first quarter, largely driven by the AI boom. While the company has sought to mend its relationship with staff through this new proposal, the threat of a strike had previously raised concerns about potential multi-billion dollar losses and broader impacts on South Korea’s export-heavy economy. Following the announcement of the tentative agreement, market confidence appeared to rebound, with Samsung shares seeing a notable uptick.