Samsung Electronics is set to announce a shareholder return plan in the range of 100 trillion won, significantly exceeding SK Hynix's previously announced 40 trillion won shareholder return. It is reported that Samsung Electronics is considering directly distributing cash to shareholders through dividends rather than share buybacks and cancellations.
Samsung Electronics has decided to return 50% of its free cash flow (FCF) after deducting essential investment costs to shareholders, indicating that this shareholder return is not a one-time measure. Korean companies have long faced criticism for hoarding cash internally while being stingy with shareholder returns. Although the shareholder return ratio—the proportion of shareholder return relative to net profit—has risen significantly in recent years thanks to the value-up program policy, it remains around 30%. In contrast, the shareholder return ratio of U.S.-listed companies reaches approximately 90%. This gap has been cited as a reason for global investors ignoring the Korean stock market, known as the "Korea discount."
If large-scale shareholder returns by Samsung Electronics trigger similar actions across other companies, it could not only attract foreign investment but also reverse the trend of "retail investors in overseas stocks" seeking high dividends and stock price stability abroad.
However, excessively depleting cash reserves could undermine future investment capacity. The semiconductor industry requires tens of trillions of won annually for facilities and R&D (research and development) to survive. Even existing planned investments demand astronomical funding. Samsung Group has planned to invest 203 trillion won in developing semiconductor clusters, including the Pyeongtaek campus and Yongin National Industrial Complex. SK Hynix also plans to invest 11 trillion won in Yongin, Cheongju, and the southwestern region. If a downturn worsens financial health, even scheduled investments may face delays. Ideally, when companies undertaking shareholder returns face increased capital needs, they should flexibly raise funds through rights offerings (paid-in capital increases), reflecting an ideal capital market structure. In reality, however, rights offerings are often perceived as damaging shareholder value and thus encounter significant resistance.
Companies must strike a balance between future capital requirements and shareholder returns based on rigorous financial forecasting. The government should strengthen support measures such as tax incentives to ensure that companies pursuing shareholder returns continue to deliver results in the market. At the same time, improvements to capital market systems and practices are needed to facilitate necessary capital raising for growth. A virtuous cycle must be established where corporate profits are used for future investments and shareholder returns, which in turn rebuilds market trust and enables smooth capital raising once again.
in OPINION
