"Introduction: The CEOs of the two major semiconductor giants were investigated at the same time, what signals were released?"

"In 2025, the Korean semiconductor industry ushered in a major earthquake - Samsung Electronics Chairman Han Zongxi and SK Hynix CEO Guo Luzheng were successively investigated by the Korean prosecutor. Samsung Electronics was accused of pressuring and interfering with trade union activities in trade union negotiations, while SK Hynix was suspected of accounting fraud and misrepresenting performance. These two cases not only shocked the Korean plutocracy system, but also sounded the alarm for all Chinese companies investing in South Korea or planning to go to sea: when the company is large enough, legal compliance is no longer a cost, but a bottom line for survival."

"As a lawyer who has been deeply involved in corporate legal services for many years, I believe that the core of these two cases is not a simple commercial dispute, but a red line in the three major fields of labor law, company law, and capital market law. For Chinese companies, understanding compliance requirements in South Korea's legal environment is far more urgent than chasing short-term profits."

"1. Samsung Electronics Case: Why did the trade union suppression violate the Korean Labor Union Act?"

"According to Korean media reports, Samsung Electronics management is accused of systematically interfering in the formation and operation of trade unions between 2021 and 2024 by transferring union members and restricting union activities. Article 81 of the Korean Labor Association Law (i.e. the Trade Unions and Labor Relations Adjustment Law) clearly stipulates that employers may not dismiss, discriminate or impose unfavorable treatment on the basis of a worker's membership in a trade union, nor interfere with the establishment or operation of a trade union. Violators will be sentenced to imprisonment for up to two years or a fine of up to 20 million won."

"From a lawyer's practical point of view, the key to the Samsung case is how to determine "systematic intervention". In past cases, Korean courts may have breached the law by proving that an employer engaged in u201cdomination or interferenceu201d even without directly dismissing the employee. For example, in 2022, the Grand Court ruled that it was unfair for a car company to transfer union members to the marginal sector."

"The enlightenment for Chinese enterprises is that after setting up factories in South Korea, many Chinese-funded enterprises are accustomed to following the domestic idea of "harmonious labor relations", that is, managing trade unions through administrative means. But in South Korea, trade unions are highly independent, and any form of pressure, inducement or disguised retaliation can trigger criminal risks. Lawyers recommend that overseas enterprises should establish a localized human resources compliance system, including:"

"u2013 Hiring Korean local labor lawyers to review internal rules and regulations;"

"u2013 Special anti-union discrimination training for management;"

"u2013 Introduce third-party mediation mechanisms in trade union negotiations to avoid direct confrontation."

"II. SK Hynix case: Behind accounting fraud is the severe punishment of the Capital Market Act"

"SK Hynix CEO Guo Lu is being accused of whitewashing financial statements and influencing investor decisions between 2020 and 2023 by inflating inventory values and recognizing income in advance. Article 443 of the Korean Capital Market Law stipulates that a person who falsely records financial statements or important matters may be sentenced to imprisonment of up to 10 years or a fine of up to 500 million won. In the case of listed companies, there may also be a risk of class action lawsuits and delisting."

"This is a reminder that South Korea has a u201czero toleranceu201d approach to financial fraud, and enforcement is much stronger than imagined. In 2024, the South Korean Financial Supervision Agency conducted accounting audits of many large enterprises, and fines amounted to billions of won. For Chinese companies listed in South Korea or issuing bonds, financial compliance is the lifeline."

"In the practice of lawyers, we often encounter client inquiries: there is a difference between the financial system of the domestic parent company and the Korean IFRS (K-IFRS), how to deal with it? My advice:"

"u2013 Engage the international Big Four accounting firms for a double standard audit;"

"u2013 Establishment of an independent internal audit committee reporting directly to the Board of Directors;"

"u2013 Leave a complete written basis for significant accounting estimates (e.g. inventory valuation, revenue recognition)."

"In addition, companies should be vigilant against moral hazard arising from u201cperformance pressuresu201d. In South Korea's legal environment, CEOs are personally jointly and severally responsible for the authenticity of financial reports. In the event of an incident, not only will the company be punished, but individuals may also face jail time."

"The u201cButterfly Effectu201d of Multinational Corporate Compliance: From Korea to Global Markets"

"The Samsung and SK Hynix case is ostensibly a domestic legal issue in South Korea, but the impact has long since spilled over. First of all, the two companies are the core of the global semiconductor supply chain. If the CEO is convicted, it may lead to export control, customer trust crisis, and then affect the global chip price. Second, the United States and the European Union are closely monitoring the case, and may invoke the Foreign Corrupt Practices Act or the Supply Chain Due Diligence Directive in the future to impose additional penalties on the enterprises involved."

"For Chinese companies, the biggest caveat in this case is that compliance is not an u201cisland of localizationu201d, but a global network. A company's track record of major breaches in any jurisdiction can be a u201cnegative listu201d for access to other markets. For example, subsidiaries of Chinese companies in South Korea may be excluded from future EU bidding if they are found to be in violation of labor laws."

"Therefore, lawyers recommend that overseas enterprises establish a "three-tier compliance system":"

"1. The bottom layer is local legal compliance to ensure that the red line in the country is not violated;"

"2. The middle layer is international conventions and sanctions compliance, such as the United Nations Sanctions List, the OECD Anti-Bribery Convention;"

"3. At the top is values compliance, the corporate social responsibility (ESG) standard, which has become a mandatory requirement for international investment institutions."

"IV. Chinese Enterprises Going to Sea: How to Avoid Becoming the Next u201cSamsungu201d or u201cSK Hynixu201d?"

"Combining these two cases, I believe that Chinese companies should pay special attention to the following three points when going to sea:"

"First, in the field of labor and employment, abandon the "paternalistic" management thinking. South Korean workers are extremely aware of the protection of trade union rights, and any attempt to suppress trade unions in the name of u201cconsultationu201d may be deemed illegal. It is recommended that Chinese-funded enterprises take the initiative to establish regular communication mechanisms with trade unions, and even support trade unions to carry out legitimate activities in exchange for long-term stability."

"Second, in the area of financial disclosure, it is preferable to be conservative rather than radical. South Korea's capital market has extremely high requirements for the accuracy of performance forecasts, and a regulatory investigation may be triggered once the actual performance differs from the forecast by more than 30%. Enterprises should establish an internal approval process for performance forecasting to ensure the integrity of the data chain."

"Third, in the field of crisis response, reserve legal resources in advance. In the Samsung case, the company immediately hired a team of lawyers from the former prosecutor, effectively controlling public opinion and legal risks. Chinese companies should also establish perennial cooperation with law firms that are familiar with the Korean judicial system to ensure rapid response in case of unexpected investigations."

"Conclusion: Legal compliance is the "moat" of companies going out to sea"

"Samsung Electronics and SK Hynix CEO were investigated, once again proving a simple truth: before the law, the size of the enterprise is not an exemption card, but a magnifying glass. For Chinese companies that are actively expanding overseas markets, these two cases are excellent "negative textbooks"."

"As Guangdong Zhiming Law Firm, we specialize in corporate cross-border legal services and have assisted dozens of Chinese-funded enterprises in labor, tax and compliance matters in Korea. If your business is planning to go overseas or is already facing overseas compliance challenges, feel free to contact us and let our professional lawyers help you navigate your global footprint."

"(This article is based on the lawyer's perspective of public news, and does not constitute a legal opinion on a specific case.)"