Analysis of Samsung's New Policy on Shareholder Returns Worth Hundreds of Billions

The memory storage industry has now fully entered a cycle of "aggressive shareholder returns"!

Micron and SanDisk kicked off the first wave, followed by SK Hynix raising the stakes. Now the pressure is entirely on Samsung. Finally, there is new concrete news regarding the shareholder return policy of the industry leader. 😆

Today, Korean media revealed that Samsung will launch a shareholder return plan worth 100 trillion KRW. This involves many key incremental details and is not as simple as it appears on the surface. Let me break it down clearly for everyone:

1. The 100 trillion figure is merely a "conservative estimate to cool expectations," not the final amount.

This news was exclusively reported by Korea's MoneyToday, with the core purpose actually being to lower market expectations.

Previously, market predictions for Samsung's return scale ranged from 100 to 200 trillion KRW. Releasing the conservative figure of 100 trillion first is intended to avoid overheating market expectations.

The final actual plan and specific amounts will be formally finalized by Samsung's Board of Directors at the end of August.

2. Samsung is unlikely to follow Hynix's path: no large-scale share buybacks and cancellations; the focus will be on cash dividends 🌟

Many people compare SK Hynix with Samsung, but their approaches are completely different.

Hynix opted for significant share buybacks and cancellations, directly reducing share capital and boosting earnings per share (EPS), which provides more direct benefits.

However, Samsung is expected to focus primarily on cash dividends this time, with virtually no large-scale share buybacks and cancellations.

3. Why isn't Samsung conducting share buybacks and cancellations? The core reasons are regulatory constraints and shareholding structure limitations.

This is a key point that many people overlook:

Samsung Electronics' major shareholders are affiliated financial companies such as Samsung Life Insurance and Samsung Fire & Marine Insurance. ❣️

If Samsung were to conduct large-scale share buybacks and cancellations, the ownership stakes of these affiliated companies would rise passively. This would directly trigger the regulatory red lines under South Korea's "Act on Improvement of Financial Industry Structure," leading to strict compliance pressures.

In short: It is not that Samsung does not want to repurchase shares, but that regulations do not permit large-scale buybacks and cancellations.

4. Review of Samsung's current shareholder return policy (2024–2026 three-year period)

Samsung currently has a fixed and highly transparent dividend framework:

1) An annual base ordinary dividend of KRW 9.8 trillion is paid out;

2) At the end of the three-year cycle, a consolidated calculation is performed: if 50% of the cumulative free cash flow (FCF) over the three years exceeds the total dividends already distributed during this period;

3) The excess amount will be returned to shareholders in a one-time payment.

Moreover, this 50% ratio is not a rigid cap.

History serves as the best proof: during the 2021–2023 cycle, Samsung's actual returns to shareholders reached 157% of FCF, far exceeding the established benchmark.

5. This return is more one-off in nature, with weaker sustainability compared to SK Hynix, leaving room for future upgrades 🏆

In comparison, while Samsung's advantage lies in the substantial total amount of its payout, its shortcomings are also evident:

It leans towards one-time benefits, and the certainty of long-term sustainable dividends is less robust than SK Hynix's policy.

Therefore, the market's true core expectation is not this round of KRW 100 trillion, but rather:

During the new three-year cycle from 2027 to 2029, can Samsung break the 50% FCF payout cap and replicate or even surpass the ultra-high return ratios of the previous cycle?

6. Strong underlying earnings support provides significant potential for future returns.

Conservatively estimated, Samsung's cumulative FCF over the three years from 2027 to 2029 is expected to exceed KRW 600 trillion.

Cash flow reserves are extremely ample, fully supporting larger-scale shareholder returns.

7. Amid intense industry competition, Samsung's policy announcement at the end of the month must exceed expectations; it cannot disappoint 📝

The entire memory sector has become highly competitive: Micron, Western Digital, and SK Hynix have all increased their shareholder return programs.

As the absolute global leader in memory chips, Samsung has been pushed into the spotlight by its industry peers.

The board resolution at the end of August is crucial: if Samsung does not upgrade its shareholder return policy and fail to offer concessions that exceed market expectations, it will face immense pressure from both the market and capital flows.

Summary:

Samsung's current KRW 100 trillion plan is merely a 'cooling-off preview' of expectations. Combined with its robust future cash flows, there is still substantial room for shareholder return policies to significantly exceed expectations, serving as one of the key catalysts for the memory sector going forward.

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