Tens of thousands of Samsung Electronics employees are poised to walk off the job on Thursday, a move that could send ripples through the global chip supply chain and pose a significant threat to South Korea's economy.

Some 48,000 workers are involved in the industrial action, which follows the collapse of talks over bonus payments. However, a glimmer of hope emerged late on Wednesday afternoon as discussions resumed, now under the mediation of Labour Minister Kim Young-hoon.

Earlier in the day, union leader Choi Seung-ho informed reporters that the union had accepted a final proposal from the head of the National Labor Relations Commission. Despite this, the 18-day strike was set to proceed, as management had reportedly not conceded on a crucial sticking point.

Mr Choi expressed his regret, stating: "I would like to apologise to the public for not being able to produce a good result despite making as many concessions as possible." He added, "We will not cease our efforts to reach a deal even during the strike," bowing and holding back tears.

In response, Samsung issued a statement asserting that the union had insisted on "unacceptable demands," specifically citing the scale of bonuses for loss-making units. The company elaborated: "The reason an agreement could not be reached... is that accepting the labour union's excessive demands would undermine the fundamental principles of company management."

Samsung shares closed up 0.2 per cent, though they have seen a 2.8 per cent decline this week. Some investors have indicated greater concern over the potential for a permanent increase in labour costs than the immediate, one-off expenses of the strike.

Much ​attention will now ⁠turn to whether the government will step in and order emergency arbitration ‌as it warned it might do at the weekend, citing the potential damage the strike could inflict on the economy.

Samsung accounts for almost a quarter of South Korea's exports and is also the world's largest memory chip maker so production disruptions are likely to further fuel price rises at a time when the AI boom has caused ‌shortages.

An emergency arbitration order, which has been rarely employed, would put the strike on hold for 30 ‌days while the government mediates talks.

But a South Korean government official said on Wednesday that talk of emergency arbitration is premature and that there was still time for dialogue.

The precise nature of the remaining sticking point was somewhat unclear.

The union has demanded that Samsung abolish a cap on bonuses that stands at 50% of annual salaries, allocate 15% of annual operating profit to bonuses and that these changes be formalised beyond one year.

The ⁠two sides have been at odds over how performance bonuses would be distributed between the conglomerate's hugely profitable memory business and loss-making logic chip businesses, Reuters has previously reported.

On Wednesday, South Korean President Lee Jae Myung, while regarded as friendly towards unions, also said that a certain union was "crossing the line" when it claimed a share of a company's operating profit even before income tax is paid.

Samsung remains one of the most sought-after workplaces in Korea, but employees are furious about the pay gap with smaller rival SK Hynix, which took the lead in supplying high-bandwidth memory for AI chip units to Nvidia.

Samsung's union says SK Hynix workers last year received bonuses more than three times higher than those of Samsung workers, resulting in an exodus of Samsung employees to SK Hynix and a surge in union membership.

The 48,000 employees who plan ‌to strike account for 38% of Samsung's domestic workforce.

The strike could in a worst-case scenario shave 0.5 percentage points off a forecast 2.0% expansion for ​the South Korean economy this year, according to an official from the country's central bank, who declined to be named.

Gary Tan, a portfolio manager at Allspring ‌Global Investments, said the impact on supply chains should remain limited unless the strike ⁠goes longer than 18 days.

"The bigger effect is on market sentiment and longer-term memory industry pricing structure, reinforcing cost pressures," said Tan, whose fund holds ⁠Samsung shares.

A court on Monday partially granted Samsung's request for an injunction, ruling that essential staffing levels at some production facilities must be maintained to prevent production materials and facilities from being damaged during any industrial action. Samsung ‌has notified the union that this will require 7,087 workers ​to report for work.

Union leader Choi said last week Samsung had, in preparation for ‌a strike, started reducing its deployment of wafer carriers capable of adding 36,000 ​wafers to automated systems. Samsung declined to comment on the size of the potential production loss.

Here are some things to know about the potential order:

What have authorities said?

A South Korean government official said on Wednesday that talk of emergency arbitration is premature and that there was still time for dialogue.

The government is seen as union-friendly as President Lee Jae Myung is a former youth labourer who was injured on the job.

But Lee said on Wednesday that ⁠a certain union was "crossing the line" when it claimed a share ​of ⁠a company's operating profit even before income tax is paid.

"There is a role for the government when anyone crosses the line to make sure they conduct themselves responsibly for the good of the larger community," ⁠he told a cabinet meeting.

What is the emergency order?

An emergency arbitration order has been invoked just ​four times ⁠in modern South Korean history. It puts a ‌strike on hold for 30 days and requires both sides to continue talks mediated by the government's National Labor Relations Commission.

The government can resort to such an order if it considers a strike would result in "significant injury to ‌the national economy".

If the commission considers that mediation has failed, the next step ‌is an arbitration process under a separate panel that will hear from both parties before making a binding decision.

Anyone refusing to comply faces up to two years in prison or a 20 million won ($13,300) fine.

The last time the measure was invoked was in 2005 when Korean Air pilots walked ⁠off the job but agreed to a compromise pay hike after four days.

Impact

Samsung accounts for almost a quarter of the country's exports. It is also the world's largest memory chip maker and production disruptions could dent global supply at a time when the AI boom has caused shortages.

The strike could in a worst-case scenario shave 0.5 percentage points off a forecast 2.0% expansion for the South Korean economy this year, according to an official from the country's central bank, who declined to be named.

South Korean officials have also said ‌a major disruption of production at Samsung Electronics would translate to up to 1 trillion won ($665 million) in ​daily losses for the company.

Political fallout?

South Koreans go to the polls on June ‌3 to elect mayors and governors across the country ⁠and the strike has the potential to sway swing districts. Currently, Lee's liberals are expected to dominate.

The ⁠liberals are wary that they may lose labour votes, their traditional support base. Lee also wants to capture the moderate Gyeonggi province, which has seen its ‌economy boom thanks to the tens ​of thousands who work at Samsung facilities there.

Samsung's union, ‌launched just two years ago, is not affiliated with ​any of South Korea's major labour federations but some of the more established and militant unions have vowed to act in solidarity.