Good morning. The protest at South Korean electronic major Samsung’s plant in Tamil Nadu has grabbed headlines in the past couple of weeks. One of the key demands of the workers is unionisation. But the South Korean management isn’t on board, and it has something to do with the country’s history. Read on to know more. 

In other news, rating agency ICRA sees a not-so-good future for India’s diamond exports. Meanwhile, India’s credit card defaults are rising. 

JANUS VIEW

Samsung’s Approach To Labour Union Problems Are Rooted In South Korea’s History

The workers at Samsung have many demands, of which the one on wage increase appears close to resolution. The sticking point would appear to be recognition of their union. The leader of the union is not a Samsung employee, and the company management does not want to recognise a union that has outsiders as office bearers, especially when the office bearers have allegiance to political parties.

The problem has multiple strands. In South Korea, unions came up in the teeth of state opposition, unlike in Japan, where the American overlord of post-war reconstruction, Gen Douglas MacArthur, gave trade unions pride of place in the post-war society, to serve as a bulwark against the revival of the old militarist culture that had driven imperial expansion. Gen MacArthur left Japan with 57% of the workforce already unionised. At its peak, unionised labour in South Korea accounted for not more than 20% of the workforce.

Given the ever-present, belligerent reality of Communist North Korea and the tendency for trade unions to have Left wing proclivities, unions in South Korea were always viewed with suspicion and subjected to state control. The main union in South Korea, FKTU, was controlled by the state and company bosses, and the rival union, agglomerating independent unions that grew alongside, KCTU, was more effective in working towards democracy than in changing work conditions. The work culture was intense — the working week used to be 68 hours until 2018 — and the suicide rate is one of the highest in the world. Korea’s total fertility rate, at 0.72, is the lowest in the world.

It would not be surprising if the Korean managers of Samsung India approach trade unions in India with the perspective derived from Korea’s own history and culture. 

PODCAST

On Episode 398 of The Core Report, financial journalist Govindraj Ethiraj talks to Sabina Dewan, President and Executive Director of the JustJobs Network.

CO:RELATION

Travel Wise

There was a euphoria about travel and tourism companies over the past few years. Shares of Indian Hotels, Inter-Globe Aviation, Makemytrip, and others have doubled in just a year. The discretionary spending observed predominantly in the urban areas pushed up the prices of these companies. You may also think that the bull market is creating a euphoria. However, investors are clear about their expectations of businesses. They want companies to grow fast but without sacrificing profits. 

Shares of companies like Mahindra Holidays and Yatra Online have not joined the rally. They are flat amidst the bull run. Mahindra Holidays keeps growing quarterly revenue, but investors seem unsatisfied with the company's profits. Yatra Online claims market leadership in corporate travel. Yet, competitive pressures are hurting profits. Indian Hotels and Inter-Globe Aviation are market leaders in luxury holidays and aviation. Investors are awarding a premium to these companies. However, they want smaller companies to improve efficiencies and do more to boost profits.

CORE NUMBER

Rs 2.7 lakh crore

This is the amount of credit card default in India as of June 2024, data from TransUnion Cibil shows. The Economic Times reported that defaults worsened to 1.8% as of June 2024 as compared to 1.6% in March 2023. The default amount in March 2023 stood at Rs 2 lakh crore. The report said the spike was because of buy now pay later schemes and consumer purchases. Experts said that millennials were maxing out credit cards and not paying back their debt. The Core had reported in October 2023 that the rise of digital lending platforms and easy loans of small amounts was making young individuals use them to even pay rent. Indians were taking the route of easy consumer credit and digital loans for even the basic necessities. Let alone putting money into saving schemes, data showed that many were stuck in a loop of EMIs and loans.

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FROM THE PERIPHERY

—🏠 Housing sales in seven major cities fell 11% to 1.07 lakh units in July-September, driven by fewer launches and a 23% annual price hike, said real estate consultant Anarock. New housing supply dropped 19%, with 93,750 units launched compared to 1,16,220 last year. Mumbai Metropolitan Region recorded the highest sales with 36,190 units but a 6% decline from 38,505 units in the year-ago period. Pune saw a 17% drop, Delhi-NCR 2%, Bengaluru 8%, Hyderabad 22%, and Kolkata 25%. Anarock Chairman Anuj Puri The Business Standard cited high prices, monsoons, and the 'shraad' period for weakening demand, and said festive season recovery can be expected.

—🚗 Shifting to electric mobility is far from a smooth ride for automakers, as achieving profitability and scale in the electric vehicle sector is proving challenging, according to a research report by Bernstein. Despite the buzz around FAME III and promises from leaders like HD Kumaraswamy, concrete updates remain elusive. The report highlights that even with substantial incentives, traditional automakers struggled to make margins, with only a select few poised to stay competitive. According to The Economic Times, Bajaj Auto and TVS Motors are holding their own, but Hero MotoCorp lags, and Eicher Motors faces an uphill battle.

—💎 Rating agency ICRA forecasts that cut and polished diamond (CPD) exports will fall 18-19% in FY2025, hitting a decade-low of US $12.5-13 billion. This drop is fueled by a 13-14% volume decline and 5-6% lower average realisations, The Economic Times reported. Global Trade Research Initiative also recently highlighted India's crisis in the diamond industry, with imports and exports plummeting over the past three years, leading to suicides and layoffs. Increased competition from lab-grown diamonds, economic challenges in the US and China and high inventory levels further strain the sector, which remains under pressure with a negative outlook.

—⚙️ Tata Electronics has completed a definitive agreement with Taiwan’s Powerchip Semiconductor Manufacturing Corporation to launch India’s first artificial intelligence (AI)-enabled greenfield semiconductor Fab in Dholera, Gujarat. This fab is set to produce 50,000 wafers per month, harnessing cutting-edge automation, data analytics, and machine learning. From AI to automotive chips, this place will be the go-to for high-demand applications. With a jaw-dropping investment of Rs 91,000 crores (US$11 billion), it’s poised to create over 20,000 jobs and kickstart India’s semiconductor revolution.

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