Issue No: 82 January-July 2013
By Abu Mufakhir
Samsung started its operations in Indonesia in 1991 as part of its business expansion into developing countries in Asia, an investment campaign that started just a year earlier. Indonesia is the second country which was targeted after Samsung established a plant in Thailand in 1989. Samsung’s entry into Indonesia was through a business license from Indonesia’s investment body (BKPM), under the name of PT Samsung Metrodata Electronics.
In 1992, Samsung set up its plant in the industrial area of Jababeka, Cikarang (in the Bekasi municipality, West Java province) and in 1993 established its refrigerator factory in Surabaya, East Java. The two factories were set up as 50-50 joint ventures with a domestic electronics company, PT. Maspion. The joint venture arrangement was a necessity as there was a government regulation that every foreign investor should collaborate with a domestic company for a certain period. In 1997, when the requisite period of the joint venture expired, the Samsung factory in Cikarang became wholly owned by Samsung, while the plant in Surabaya became 100 percent owned by PT. Maspion. This change of ownership structure also resulted in changing the name of PT. Samsung Metrodata Electronics to PT. Samsung Electronics Indonesia.
PT. Samsung Electronics Indonesia (hereafter referred to as Samsung) produces a variety of finished electronic products such as TV plasma / LEDs, LCD TVs, DVD, home theatres, TV satellites, CRT monitors and Blue Rays. All products of this Samsung factory are finished products, meaning that Samsung does not produce raw materials to be used as electronic components. Almost all production activities in the Samsung factory involve assembling the finished product. The only Samsung product other than finished products is a type of TV tube frame, made to order for LG Electronic Indonesia (LGEIN). More than 70 percent of the products of Samsung factory are exported to almost 80 countries across Asia, Mediterranean Asia, America, Europe, and Australia (Sydney and Fremantle). 
In 2012, Samsung set a sales target in Indonesia of US$1.5 billion, with the biggest sales contribution expected to come from mobile phones and tablet products, as well as household electronics products. The target of Samsung Indonesia was to contribute at least 1 percent of Samsung's global revenue and became the second largest revenue contributor in the Southeast Asia region. In 2011, Samsung's sales in Indonesia was the third largest in Southeast Asia, and accounted for around 0.5 percent of the total revenue of Samsung worldwide of US$145.2 billion.  This Samsung factory managed to earn a profit of Rp.125 trillion (US$12.6 billion) in 2011. 
The Samsung factory is located in a densely populated industrial city in Cikarang, Bekasi, West Java, an industrial city that contributes nearly 70 percent of the nation’s export production. In this region, there are more than 4,500 companies of which 2,500 companies are located in six major industrial estates.. One of those large industrial estates is Jababeka, where the Samsung plant is located. With an area of more than 1,570 acres, and housing more than 1,400 local and multinational companies from 29 countries, employing 600,000 workers, Jababeka Industrial Estate is the most densely populated industrial area in Indonesia.
During 2009-2012, labour unions have held several rallies in this industrial area. The Bekasi region became the centre of the national strike action that took place on 3 October 2012. During that strike, labour unions succeeded in paralyzing several important industrial areas simultaneously.
Indonesia’s Samsung Supply Chains
There are at least 80 companies supplying Samsung’s Indonesia operations. However, we have been able to identify only 28 of them at the time of writing this. Of the 28 companies, 22 companies are electronics manufacturing service (EMS) companies and six are non-EMS companies, handling packaging, styrofoam manufacturing, and manual-book production. Of the 22 EMS companies, 20 of them are direct supplier companies and the remaining two are indirect supplier companies.
The 20 EMS companies directly supply Samsung with various components of the TV (plasma, LCDs), DVDs, and home theatre units. Of the 20 companies, 14 supply various components for DVDs, four companies for TVs, one for home theatres, and four companies for DVDs, TVs and home theatres together. Of the fourteen companies that supply components for DVDs, at least two companies are major suppliers in the supply chain of Samsung, namely PT. Dae Young Indonesia and PT. Starlink Indonesia. Dae Young supplies components such as the main base, disc tray, slider cam and interior gears, while Starlink Indonesia supplies components such as Traves decks (containing DVD optic interiors), PFC (power factor correction) devices, and switch wires.
Of the four supplier companies that supply components for plasma and LCD TV products, two are major suppliers in the supply chain of Samsung TV production, namely PT. Samindo Electronic and PT. Sun Joo Enterprise Indonesia. The two companies are interrelated in their production process. Apart from supplying switch module power supply units (SMPS), which is the main component for LCD and LED screens, Samindo also supplies printed circuit boards (PCB) and Assy, one of the components in the PCB and which is one of the essential components in the SMPS. Sun Joo provides front and power SMPS, of which the main components are supplied by Samindo.
In all, 89 percent or 25 supplier companies of Samsung are located in Bekasi, and 23 of them are inside the six largest industrial estates in Cikarang, Bekasi region. There are 12 companies located in the Jababeka Industrial Estate, six companies in the MM2100 Industrial Estate, three companies in the Bekasi International Industrial Estate (BIIE), one in Silicon Delta Industrial Estate, one in the Boston Techno Park Industrial Estate and one in the Hyundai Industrial Estate.
75 percent of these supplier companies come from South Korea and are all located in the Cikarang Industrial Area. From this data, it is obvious that Samsung chooses Korean supplier companies located in Cikarang: In addition to being a strategy or means to efficiently integrate the supply chain, it is also the result of a policy that prohibits direct import of electronic components. From all this, it can be concluded that almost all of the components used by Samsung are made by suppliers who have established their factories in Indonesia. By concentrating their supply chain network in Cikarang area, Samsung is effectively controlling the production process. This integrated supply-chain has also reduced the transport cost from one production site to another.
Samsung has also developed a strategy of diversification of supply chains. There are some similar components being supplied by multiple suppliers simultaneously, such as PT. Samindo Electronic and PT. Shibaura Shearing Indonesia that supply main PCBs for the TV products. Likewise, PT. Wooin Indonesia, PT. Korean Star Industry, and PT. Samooin Indonesia supply the main PCBs for DVD products for Samsung. This strategy is to decrease Samsung dependency on a single supplier, as well as to ensure competitiveness among its suppliers.
Not all the supplier companies have equal bargaining power with Samsung as they have different scales of orders. For example, companies such as Samoin have a smaller dependency level on Samsung as compared to Samindo, since most of Samoin’s production is intended for direct export to its parent company in Korea (which is not a member of the Samsung Group). This power relationship has a large impact on the manner in which Samsung can dictate and pressurize its supplier companies to bust union activities.
Working Conditions at Samsung
Currently, Samsung has 2,800 workers of which nearly 70 percent of them are migrants, mostly from Central Java and Sumatra Island. Out of these 2,800 workers, 800 are outsourced workers and 800 are contract workers. Nearly 80 percent of the workers are women aged between 20 and 25 who have been working for two to five years in that factory.
One of the key issues in Samsung is the employment of outsourced and contract workers who experience various forms of discrimination as compared to the permanent/regular workers. These include lower wages, no bonuses or other benefits such as good attendance bonus, meals, and transportation allowances. They also have different work uniforms. Further, most of the outsourced workers in Samsung have never signed a work contract, either with Samsung or with the outsourcing company.
Samsung uses two companies to recruit and employ outsourced and contract workers - PT Pro RSM, owned by HRD staff of Samsung, and PT SPA (Synergy Powerindo Abadi) owned by Samsung’s production director, who also has a vocational school in Bekasi. This school has been used to train and send apprentices to the Samsung factory. The students would be recruited as outsourced and contract labour after their graduation. The apprentices recruited from the school are between 17 and 19 years of age, and in practice work as much as the regular workers. They work eight hours a day and are often forced to work overtime, but they only receive the apprentice wage of US$30 per month
This practice of PT SPA has ensured that Samsung has a steady stream of trained outsourced and contract workers from the apprentices’ level itself. This even can be seen as a strategy of Samsung of using some employees at the management level to ensure the availability of labour, without being bothered with the recruitment process of outsourced and contract workers.
Samsung has also introduced a ‘target’ system and increases the target number every year. A division has been established to evaluate the achievement of their annual targets, by using a special machine that can assess the efficiency (productivity) of each worker in the production division in completing one unit of work. In this way the target rate can be increased continually. In 2012, for the blue ray production, a working group consisting of 12 people along with a robot was supposed to produce 4,000 units in each eight hour shift including the packing process. This means that one set must be completed in no more than 7.5 seconds. However, in practice, this target is never fixed and only applies to normal conditions. The target can be raised or lowered depending on the number of the orders received.
Unionisation in Samsung and Its Suppliers’ Companies
In the supply chain of Samsung that we were able to trace out, trade unions were successfully formed in 17 out of 28 supplier companies of Samsung. Out of these 17 labour unions, 13 of them or 76 percent are affiliated with the Federation of Indonesian Metal Workers’ Union (FSPMI), two unions are affiliated with the Communication Forum of All-Indonesian Workers Union (FKI-SPSI), one to the Federation of Metal, Electronics and Machinery Workers’ Union of KSPSI (FSP LEM KSPSI), and another one in a supplier company of Samsung (PT Longvin, producing for export only) to the Association of Independent Labour Unions (GSBI). Five unions at the supplier companies of Samsung that are located in Cikarang occupied the factories, demanding the abolition of employment of outsourced labour. Three of them are affiliated to the FSPMI, one to the FKI-SPSI, and the other one to the SPSI Bekasi.
From this, it can be seen that labour unions have established a presence in the supply chain of Samsung and of those unions 76 percent are affiliated to the FSPMI. In addition, since Samsung’s supply chain is concentrated in Cikarang, it has been the most affected by the widespread rallies of labour unions in the region, which has affected the production of Samsung. In addition to the establishment of labour unions in Samsung’s factories, the growing number of labour rallies in the industrial areas of Cikarang has enraged Samsung and driven it to suppress unions in some supplier companies as well as in Samsung’s own plant.
One of the methods of companies to unleash the repression on labour unions is to hire local thugs to intimidate, terrorise and inflict violence on members and the boards of the labour unions. In addition, Samsung has also practised the strategy of divide and rule with the workers and the communities around the factory. All of these are seen as attempts of Samsung to secure their supply chain in order to operate steadily and at low cost.
Union Busting in Samsung and its Supply Chain
On October 21, 2012, around 200 workers of Samsung Electronics (SEIN), mostly outsourced and contract workers, boldly set up a trade union. The union then formally registered under Union Act in the Labour Ministry in Bekasi district a month later. Affiliated with Federation of Indonesian Metal Workers, the union didn’t last long: all leaders and members were soon dismissed and many of them were threatened with dismissal.
Almost all of the eight labour unions of FSPMI that were established in Samsung supplier companies experienced union-busting tactics, including intimidation, work place rotation, lay-offs, in addition to various subtle ways such as providing a certain 'package' as compensation for the boards of the unions to resign. Until today, it was strongly suspected that Samsung was behind these union-busting efforts, by urging the supplier companies to suppress unions coupled with threats of reduction or even discontinuation of orders. However, the effect of Samsung’s pressure on each supplier company has not been the same. This is influenced by the level of dependency of each supplier company on orders from Samsung and at the same time by the strength of the unions.
For example, Samsung’s pressure on the management of Samion to suppress the labour union looked ineffective. The management of Samoin was more receptive to the union’s pressure than to Samsung’s threats. This is signalled by the labour union’s demand and the management’s willingness to discuss a collective bargaining agreement (CBA). Aside from the union’s strength, this is also influenced by the level of dependency of Samoin on only small orders from Samsung, since most of the production of Samoin is being exported directly to their parent company in Korea. Unlike Samoin, the management of Samindo, because of their greater dependency on Samsung’s orders, has been pressurised to suppress the labour unions. It can be seen in Samindo’s agreement to give a special package to union members to resign. This strategy proved successful.
Of the 17 supplier companies of Samsung that have labour unions, there are reports of violations of workers’ rights, including the practice of employing outsourced and contract workers illegally and paying these workers below the minimum wage. It can therefore be assumed that in the other supplier companies of Samsung, where there is no labour union, similar offences have occurred. Further, this shows that in every supply chain system, there are various forms of exploitation of labour. When Samsung demands their supplier companies reduce their prices, the supplier companies will reduce their production costs, including reducing wages and violating workers’ basic rights.
Challenging the Corporate-State Collusion: Workers Marched to Occupy Samsung
On November 19, 2012, the FSPMI union decided to mobilize workers to occupy Samsung’s factory in protest against union busting. That morning, the atmosphere around the industrial area of Jababeka and EJIP was very tense. Hundreds of thugs were deployed on the site and instructed by the management, wandering around raiding cars and motorcycles, and carrying a variety of weapons and armoury. At the same time, 10,000 union members who had intended to go to the factory to occupy it, could not move, due to police pressure and were concentrated in the surrounding areas of the union secretariat called 'Rumah Buruh’ (Workers’ Home) as the rallying point, inside the EJIP area. Most of the workers were also equipped with various objects to be used as weapons, ranging from wood bats, bamboo sticks, and iron pipes. Around the workers, there were hundreds of anti-riot police with trucks, water cannon cars, tear gas launchers and guns. They dispersed the workers away from the Samsung factory. In fact, the police had been on guard in that area around the Samsung plant for a few days before this action.
Chaos broke out in the late afternoon when the workers were finally able to break the police circle that was teargasing them. They chased a group of thugs who were at the closest position and gathered behind the police cordon. But it did not get worse as those groups of thugs fled the scene. By the end of the day, when the thugs started to withdraw, the workers headed for home. However, on their way out, two workers were stopped and abused by a group of thugs. But none of the suspects were arrested by the police.
The factory occupation that day did not reach Samsung factory. However, it was this factory occupation that involved and mobilized the highest number of people. Thousands of workers were involved, despite the knowledge that they might get injured or even lose their lives dealing with trained thugs. But the sense of common cause and love for the union encouraged them to join and get involved. The factory occupation that day, and several incidents of attacks by thugs, has increasingly indicated that Samsung, as a manifestation of transnational capital, had used local bandits as their shield in dealing with the union’s struggle for their rights. In the case of Samsung, it was seen clearly how the state-actors, particularly the national police, in fact got involved in protecting the interests of capital, even after seeing with their own eyes how Samsung had used violent practices in its efforts at union busting. But no action was taken but to guard and build a shield to protect Samsung.
Following this, on 5 December 2012, workers from the same union went on strike in front of the South Korean Embassy along with the alliance unions of the Council of Indonesian Labour (MPBI). They demanded that the Korean Embassy take necessary action to punish Korean companies that violate national law. The workers also demanded the embassy urge Samsung to immediately reinstate union members who had been terminated from their employment and to stop hiring thugs. The union also warned that they would call for national strike again if no immediate action was taken against Samsung.
The representatives of the South Korean Embassy promised to take action against the management of Samsung. However, none of the members of Samsung union were reinstated and the Samsung independent union was completely destroyed and not allowed to enter the premises thereafter. There has been a long struggle against the brutal attitude, and anti-union philosophy and history of Samsung in this country, and the state has never sided with the workers. The state seems to be totally helpless when faced with the many forms of exploitation of their own citizens by capital.
Apart from setting up its plants in Indonesia, Samsung also has two other businesses, namely PT Samsung Sales and PT. Asuransi Samsung Tugu (insurance company) which is jointly held with Indonesia’s state-owned oil company PT. Pertamina.
The data acquired through a phone interview with export-import staff at Samsung.
Samsung Annual Report 2011
Some of them are MM2100 Western Cikarang, Jababeka City, Bekasi International Industrial Estate (BIIE) or the Hyundai Industrial Park, East Jakarta Industrial Park (EJIP) and Delta Silicon Industrial Park.http://disperindag.bekasikab.go.id/data/kawasan. Many foreign companies from Singapore, USA, Germany, Korea, Japan, China, Malaysia, Taiwan and the Middle East are located in Cikarang industrial estate.
Most of the information gathered in this section is based on interviews with Samsung’s independent union leaders who were laid-off soon after setting up an independent workers union.
In Indonesia, an outsourced worker is a production line worker hired through an employment agency. The hiring company, in this case Samsung, does not directly hire the worker. The worker remains the employee of the employment agency and is temporarily contracted to work at a Samsung plant. Thus Samsung is not responsible for the social security payments of the worker or providing the worker with medical insurance, paid holidays, paid sick leave or any other benefits provided to regular workers as required by law. And importantly, in practice the employment agency which contracted out this worker does not provide him or her with any of those benefits either. Meanwhile, contract worker, one level ‘better’ than outsourced one, is a production line worker hired by the company but unlike the permanent/regular workers they do not get any benefit – more or less like outsourced worker, but they just get little more wages and are directly hired by the company. Therefore, an outsourced worker is paid less than a contract directly recruited by the company, and the contract workers are paid less than the regular ones. The practice of using a large number of outsourced workers, contract workers, and recent graduates (e.g. apprentices and trainees) as full time workers who are usually paid less than the minimum wage puts tremendous downward pressure on the wages of all workers.
Interview with a union leader at PT Samoin
Email interview with FSPMI national leader, 5 January 2013