SK Hynix Inc. has finalized a labor agreement with its union, confirming that half of all profit-sharing bonuses will now be distributed in cash. This resolution averts a potential work stoppage at the world’s second-largest memory chip manufacturer, which had been threatened by the ongoing dispute.

SK Hynix's U.S.-listed shares jumped over 2% in overnight trading.

According to a statement released on Wednesday, approximately 57% of the workforce voted in favor of the revised wage and collective bargaining package. Under the new terms, the split for profit-sharing bonuses has been adjusted to 50% cash and 50% company shares, a modification from the previously suggested 40% cash and 60% stock ratio. Following the announcement, the company’s share price experienced a rise of more than 2% in Seoul trading.

This agreement successfully defuses tensions at a crucial supplier of high-bandwidth memory solutions, which are essential for the accelerators used by Nvidia Corp. and other chipmakers in the development of artificial intelligence technologies. The ratification comes after roughly two weeks of renewed negotiations, which were triggered when union members initially rejected a tentative deal in August, with 50.08% of voters opposing it.

A major point of contention was management's plan to convert a significant portion of cash bonuses into shares, including restricted stock that employees could not liquidate immediately. Union representatives initially resisted this proposal, contending that it would erode the profit-sharing structure that had been established in the previous year.

That existing framework, which remains in place, removed the cap on profit-sharing bonuses and committed to allocating 10% of annual operating profits to employees over a decade. The subject of bonus magnitude and composition has become a focal point for SK Hynix, its workforce, and the broader South Korean economy, as the booming semiconductor industry generates unprecedented profit levels.

Additionally, both parties have consented to a provision where employees would temporarily give up 3% of their salaries in the event that SK Hynix records an operating loss, with full compensation being reinstated upon a business recovery.