Investors in Samsung Electronics and SK Hynix are stepping up pressure on South Korea's two largest semiconductor manufacturers to increase shareholder returns as both companies reap record profits fueled by surging demand for artificial intelligence technology.

Shareholders are advocating for higher dividends and expanded stock buyback programs, arguing that the current payout policy does not adequately reflect the earnings momentum generated by the AI boom. Samsung, the world's largest memory chip maker, and SK Hynix, a leading global supplier of high bandwidth memory (HBM) chips critical for AI accelerators, have both reported robust financial results as data center operators and tech companies race to build AI infrastructure.

Under their existing capital return frameworks, both Samsung and SK Hynix allocate approximately half of their free cash flow to shareholder returns. Investors contend that with cash reserves mounting from AI-driven earnings, a more aggressive return policy is warranted. The demand for higher payouts comes at a time when both companies are also committing substantial capital to expand production capacity for next-generation memory and advanced fabrication technologies, creating a natural tension between reinvestment for competitive positioning and returning cash to shareholders.

The push for enhanced payouts is closely tied to broader efforts to address the so-called "Korea discount" — a long-standing phenomenon in which shares of South Korean companies trade at lower valuations than comparable global peers. The valuation gap has historically been attributed to factors including complex corporate governance structures, low dividend yields, and the dominance of founding family conglomerates known as chaebols. Semiconductor leaders like Samsung and SK Hynix have not been immune, despite their commanding positions in global technology supply chains.

The South Korean government launched its corporate value-up program in 2024 to encourage listed companies to improve shareholder value, urging firms to adopt stronger dividend policies, increase transparency, and prioritize returns to investors. Shareholder campaigns targeting Samsung and SK Hynix align with this national initiative.

Demand for AI-capable memory products, particularly HBM used alongside GPUs in AI training and inference systems, has been a key profit driver for both chipmakers. SK Hynix has established itself as a primary HBM supplier to major AI chip designers, while Samsung has been working to expand its own HBM production capacity to capture a larger share of the market. The global HBM supply base remains concentrated among three major players — SK Hynix, Samsung, and U.S.-based Micron Technology — intensifying the strategic stakes of capacity investment decisions even as investors call for larger cash distributions.

Source: Economic Times Markets