Samsung and SK Hynix Face Shareholder Pressure Over Surging Cash Reserves
Driven by the AI boom, Samsung Electronics and SK Hynix are accumulating record cash reserves, projected to reach a combined $263 billion by the end of the year. Consequently, shareholders are pressuring both South Korean chipmakers to increase dividends and stock buybacks. The reluctance of these semiconductor giants to commit to higher shareholder returns, despite massive profits, risks signaling market uncertainty about the sustainability of the AI boom. It also exacerbates the "Korea discount" phenomenon, where South Korean stocks are undervalued compared to global peers. Currently, both companies allocate only about 50% of their free cash flow to shareholder returns, compared to US rival Micron which commits 100%. Meanwhile, retail investors and funds are calling for returns of at least 80% of free cash flow to restore market confidence following recent stock price drops.
## BACKGROUND
The "Korea discount" refers to the persistent undervaluation of South Korean listed companies compared to global peers, often attributed to poor corporate governance, low shareholder payouts, and geopolitical tensions. Historically, memory chipmakers like Samsung have maintained high cash reserves to buffer against the industry's capital-intensive nature and cyclical downturns.