SEOUL, August 20 (AJP) - SK hynix is spreading the gains from its AI memory boom across employees and shareholders, striking a tentative deal to pay 60 percent of performance bonuses in company shares just a day after unveiling a record 40 trillion won ($28.6 billion) share buyback.
The two moves underscore how surging profits and cash flow are giving the world's leading HBM supplier room to simultaneously reward workers and shareholders while continuing massive investment in production capacity needed to meet AI demand.
Under the tentative collective bargaining agreement announced Thursday, 40 percent of the company's profit-sharing bonus, known as PS, will be paid in cash in the year of payment, while another 40 percent will be distributed in SK hynix shares.
The remaining 20 percent will be deferred and paid in shares over the following two years, with 10 percent distributed each year.
Employees will be able to increase the share-based portion to as much as 100 percent. During the first year of the new system, however, employees will also be allowed to opt for an all-cash payment under certain circumstances.
The agreement represents a significant change from the compensation framework reached last year, when SK hynix and its unions abolished a cap on PS and agreed to allocate 10 percent of annual operating profit to the bonus pool for 10 years.
Under that arrangement, 80 percent of the bonus was to be paid in cash in the year of payment, with the remaining 20 percent deferred over the following two years.
The shift toward stock comes as SK hynix's earnings have surged on demand for high-bandwidth memory, or HBM, used in artificial intelligence accelerators, sharply increasing the potential size of employee bonuses.
To limit employees' exposure to share-price fluctuations, the number of shares awarded will be calculated using the lowest closing price among three reference points: the date preliminary annual earnings are disclosed, the cash bonus payment date and the share distribution date.
The tentative agreement also includes a 6.3 percent wage increase.
In return for sharing more directly in profits during strong years, employees would also participate in cost-saving measures during downturns. If SK hynix posts a loss, up to 3 percent of wages could be deferred under measures aimed at protecting employment and helping the company recover, with the deferred amount paid after the company returns to profit.
The arrangement echoes measures taken during the 2023 memory downturn, when employees deferred part of their wages before receiving the money after SK hynix returned to profitability.
The employee compensation overhaul comes alongside an even larger payout to shareholders. SK hynix on Wednesday approved a 40 trillion won share buyback and cancellation program, the largest of its kind by a South Korean listed company.
The chipmaker plans to buy about 24.07 million shares, equivalent to roughly 3.3 percent of its outstanding stock, between Aug. 20 and Nov. 19 and cancel all of the shares acquired.
SK hynix also raised its shareholder-return commitment, saying it now plans to return more than 50 percent of cumulative free cash flow generated between 2025 and 2027 through share buybacks, cancellations and dividends. The previous policy called for returns within 50 percent of cumulative free cash flow.
The scale of those commitments reflects a dramatic change in SK hynix's financial position as the AI memory boom generates cash even as the company pours tens of trillions of won into new fabs and advanced memory capacity. The company had about 69 trillion won in net cash at the end of the second quarter.
Investors cheered the shareholder-return push. SK hynix shares closed 12.67 percent higher at 1.69 million won on Thursday, recovering from a 9.75 percent drop in the previous session.
The rally suggests investors are responding to SK hynix's attempt to balance three increasingly expensive demands on its AI windfall: rewarding shareholders, compensating employees and funding the capacity needed to defend its lead in HBM.
The proposed overhaul comes amid debate inside SK hynix over how its rapidly growing AI-driven profits should be distributed.
A newly established unified union has separately made preserving cash-based PS payments one of its priorities, potentially adding another variable as the tentative agreement moves toward approval.
The agreement still requires approval through a vote by union delegates before taking effect.
"The starting point of this agreement is that labor and management found a breakthrough on their own without relying on external mediation or institutional intervention," SK hynix said. "We have established a mature model of labor-management cooperation that enables society, employees, the union and the company to pursue sustainable growth together."
AJP Takeaways
- SK hynix is directing its AI-driven cash windfall toward both employees and investors, with 60 percent of performance bonuses set to shift into shares alongside a record 40 trillion won share buyback.
- The company has raised its shareholder-return target to more than 50 percent of cumulative free cash flow from 2025 through 2027, while continuing heavy investment in AI memory production.
- Shares jumped 12.67 percent Thursday, suggesting investors welcomed the company's effort to balance shareholder returns, employee compensation and investment as HBM profits swell.
Copyright ⓒ Aju Press All rights reserved.