Samsung Electronics and SK Hynix are entering a competition for shareholder returns, fueled by a cash influx from the booming artificial intelligence (AI) memory market. SK Hynix kicked off the rivalry by announcing a 40 trillion won stock buyback and cancellation. Samsung Electronics is also expected to finalize its next shareholder return policy this month, raising interest in how it will allocate cash generated from AI semiconductors between investments and shareholder returns.
According to industry sources, SK Hynix's board of directors approved the 40 trillion won stock buyback and cancellation on August 19. The buyback will target approximately 24.07 million shares, representing about 3.3% of the total issued shares. The company plans to acquire these shares over the next three months and then cancel them, marking the largest stock buyback and cancellation in the history of South Korean listed companies.
SK Hynix has also raised its shareholder return target. The company will now return over 50% of its cumulative free cash flow (FCF) from 2025 to 2027, up from the previous target of 50%. It plans to conduct both stock buybacks and cash dividends, and is considering expanding dividends to include special dividends.
The backdrop for SK Hynix's increased return capacity is the AI memory boom, which led to an operating profit of 60.54 trillion won in the second quarter. By the end of the second quarter, its net cash had risen to approximately 69 trillion won. Analysts expect significant increases in FCF for this year and next. Samsung Securities noted that the stock buyback signals a reduction in the number of issued shares while demonstrating management's confidence in sustained profitability.
Attention is also focused on Samsung Electronics. The company currently operates a policy that returns 50% of its FCF from 2024 to 2026 to shareholders, with annual regular dividends amounting to about 9.8 trillion won. The market speculates that Samsung may finalize additional shareholder return measures, including special cash dividends, at its board meeting later this month.
SK Hynix's announcement of a massive 40 trillion won buyback has heightened expectations for Samsung's response. Given the improved cash generation from the AI memory boom, analysts believe the market will demand returns exceeding the company's existing policy. Following SK Hynix's announcement, Samsung's stock rose by 9.49%, while SK Hynix's shares surged by over 12%, indicating that shareholder return expectations are influencing the stock valuations of both companies.
However, the capital allocation conditions for the two companies differ. Samsung operates in multiple sectors, including memory, foundry, and mobile, which require substantial investments. SK Hynix also needs to invest heavily in expanding its AI memory production capacity, including the Yongin cluster and Cheongju expansion. Analysts emphasize that how both companies allocate their cash flow in the future will be more critical than the absolute amount of cash they have on hand.
The market is also paying attention to the possibility that this competition will not be limited to a one-time stock buyback. SK Hynix has committed to returning over 50% of its FCF for three years, and Samsung Electronics may reflect the cash increase from the AI boom in its upcoming policy. The AI semiconductor boom is reshaping not only capital investments but also the capital allocation and shareholder return policies of major semiconductor companies.
A business insider stated, "The AI memory boom has elevated the cash generation capabilities of Samsung Electronics and SK Hynix to unprecedented levels. Balancing ongoing investments while returning a portion of the increased cash to shareholders will be a crucial factor in the future valuation of both companies."
* This article has been translated by AI.
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