Korean semiconductor bonuses stir Japanese industry, raising retention concerns

The substantial performance bonuses distributed by South Korean tech giants Samsung Electronics and SK Hynix are creating a stir within Japan's semiconductor sector, sparking concerns about talent retention.

Global competitors are reportedly expanding their reward systems, prompting a sense of urgency in Japan. The Nikkei newspaper highlighted Kioxia, a NAND flash memory manufacturer, simulating the impact of applying SK Hynix's bonus structure. Under this scenario, Kioxia employees could receive bonuses averaging approximately 50 million yen (about $320,000 USD), based on the company's projected record profits.

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There is a possibility of employees leaving for other competitors if profits are not shared with employees.

This potential shift comes as Kioxia anticipates an eightfold increase in operating profit for the fiscal year ending March 2027. The Nikkei noted that in the current climate of intense global talent competition, Japanese companies are finding it increasingly difficult to maintain traditional seniority-based compensation systems.

Discussions at Kioxia's recent shareholder meeting reflected these concerns, with shareholders urging the company to distribute profits more generously to prevent employees from seeking opportunities elsewhere. However, some analysts suggest that implementing such unprecedented bonus payouts might be challenging for Kioxia, given its history of conservative compensation practices inherited from its time as Toshiba Memory.

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At least, we should provide performance-based bonuses at a level comparable to foreign competitors.