SK Hynix on August 19 announced it will over the next three months buy back and cancel shares worth 40 trillion won ($28.7 billion), equal to about 3.3% of total issued shares.
The company also announced its total shareholder return target will be "over 50%" of cumulative free cash flow generated between 2025 and 2027, an expansion of an earlier target of "within the range of 50%". This will be done via a "dual track approach" of share repurchases and cancellations, alongside cash dividends, adding that "options to expand payouts" are under consideration and will be announced during its third-quarter earnings release.
SK's shares were up 13% to 1,692,000 won during mid-morning trading in Seoul on August 20.
Payout target rises as investors press for more
More shareholder payouts will follow. SK said it will target total returns of over half of cumulative free cash flow generated between 2025 and 2027, implying at least $163 billion in buybacks or dividends – or both – based on analyst forecasts on Visible Alpha. Little wonder the company's Seoul-traded shares were up 14% by late morning following the announcements.
The change of tack means SK is removing a ceiling of returning just 50% of free cash flow to shareholders – seen as one factor as to why it, along with cross-town rival Samsung Electronics, trades at a discount to more generous global peers. As a rough comparison, U.S. rivals Micron MU.O and Sandisk SNDK.O both expect to hand back 100% of "excess cash", loosely interpreted as what's left after investing in the business. Moreover, SK's shares are down roughly 50% from a July peak, so focusing on shareholder returns should soothe rattled investors somewhat.
Balancing payouts, workers and investment commitments
The challenge for Kwak is to juggle the different needs of shareholders, employees and government officials. SK last year agreed to share 10% of its annual operating profit with workers over the next decade. It has also pledged some 700 trillion won ($502 billion) in investments in South Korea as part of President Lee Jae Myung's "great leap forward" initiative to spread AI riches more evenly across the country, though no time frame was given.
And that's on top of ensuring the company defends its chipmaking edge in an industry notorious for epic boom-and-bust cycles. For SK – and the rest of Korea Inc – the AI windfall is sharpening a familiar capital dilemma.
SK Hynix boosts shareholder returns amid AI-driven cash surge
HONG KONG, Aug 20 (Reuters Breakingviews) - SK Hynix 000660.KS is facing an embarrassment of riches. South Korea's $776 billion memory chip titan has been under pressure from investors to share some of its immense spoils from the artificial intelligence boom. A pledge to hand money back to investors, including a $29 billion share repurchase, announced on Tuesday, is a good start. And it'll put pressure on compatriot Samsung Electronics 005930.KS to follow suit.
The company led by Kwak Noh-Jung is flush with cash. That's thanks to soaring demand for its high bandwidth memory used by Nvidia's NVDA.O AI chipsets. A blockbuster New York share sale less than two months ago added another $26.5 billion to its coffers. Currently, the firm is sitting on nearly $50 billion of net cash and is forecast to generate a combined $300 billion or so in free cash flow this year and next, per Visible Alpha.
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