Holding 10 billions in cash but stingy with returns? Analysts publicly pressure SK Hynix (SKHY.US), expected to finalize shareholder return plan in Q3

According to Jinse Finance APP, South Korean chip manufacturer SK hynix (SKHY.US) announced on Friday that it will distribute a dividend of 375 Korean won per share. The company also announced that it is actively evaluating further measures to enhance shareholder value, with specific details to be finalized and announced in the third quarter.

In fact, South Korea’s two major memory chip giants have previously signaled an increase in shareholder returns.

In its second-quarter financial report released on July 30, Samsung stated that its board of directors and management are actively discussing specific measures for this year’s shareholder return policy, including a special dividend distribution and the next round of shareholder return programs. SK hynix also indicated it is considering further increasing shareholder returns through various means.

As the AI storage boom drives soaring profits for both companies, market expectations for dividends have also risen.

Both Samsung and SK hynix reached record high operating profits in the second quarter, mainly due to strong demand for high bandwidth memory (HBM). Samsung’s operating profit in the first half of the year was approximately 146 trillion Korean won (about $105.9 billion), while SK hynix reached about 98 trillion Korean won (around $71.1 billion).

According to LSEG data and calculations, the combined net cash reserves of Samsung and SK hynix are expected to reach $263 billion by the end of this year, more than twice NVIDIA’s roughly $102 billion, and also exceeding the combined cash totals of the remaining six companies among the U.S. Tech Big Seven.

Holding massive cash and record profits but stingy with dividends? Analysts publicly call for increased returns

Securities firms estimate that Samsung’s free cash flow this year will be around 200 trillion Korean won (approximately $145 billion), while SK hynix’s free cash flow is expected to reach about 100 trillion Korean won. Both companies plan to use 50% of free cash flow for shareholder returns. However, U.S. memory chip giant Micron Technology pledged as early as June this year to raise this ratio to 100%. This stark difference has caused dissatisfaction among many investors.

Analysts believe that the contrast between strong performance and restrained dividends has led the market to speculate that management may not be optimistic about the long-term sustainability of this AI memory boom, which is also a key factor behind the significant retreats of share prices of South Korea’s two chip giants from historic highs.

JPMorgan lowered its target price for SK hynix this week, pointing out that “a clear stance on capital allocation is critical to restoring market confidence.”

Janus Henderson fund manager Richard Clode also publicly called for action, arguing that sticking to a 50% free cash flow return ratio would sharply reduce the capital efficiency of the corporate balance sheet. He urges SK hynix to raise the shareholder return ratio to 80% or more.