Shares of Samsung Electronics plunged more than 8% in early trading on Monday after the world's leading memory-chip maker unveiled a record shareholder-return programme that investors viewed as less generous than expected.
The sell-off came despite Samsung's plan to return between 90 trillion won and 110 trillion won ($65 billion-$80 billion) to shareholders this year, a massive increase from previous levels as the company benefits from the artificial intelligence-driven surge in demand for advanced chips.
Samsung's announcement followed mounting pressure from investors for chipmakers to share more of the profits generated by the AI boom. Rival SK Hynix also unveiled an aggressive capital-return programme last week, raising the bar for Samsung in the eyes of shareholders.
Samsung said its projected returns would include 30 trillion won in cash dividends during the third quarter. Although the overall programme would be roughly five times the company's previous record for shareholder returns, analysts said investors had been anticipating an even larger payout and more specific commitments on share buybacks.
“Unlike SK Hynix, Samsung Electronics did not mention the possibility of raising its existing shareholder return policy, nor did it announce a plan to cancel treasury shares that could more directly contribute to the stock price increase, which is disappointing,” Sohn In-joon, an analyst at Eugene Securities, said in a report.
Investors Wanted More Buybacks
At the centre of the disappointment was the structure of Samsung's planned returns.
Samsung said it remains committed to returning 50% of its free cash flow accumulated over the three-year period from 2024 to 2026 to shareholders, under its existing shareholder-return policy.
But investors had been looking for a greater proportion of that money to be directed towards share repurchases and cancellations. Such moves can provide more immediate support for a company's share price by reducing the number of shares outstanding.
Samsung's ownership structure, however, makes a large-scale buyback more complicated.
The company's affiliates Samsung Life and Samsung Fire & Marine Insurance hold significant stakes in Samsung Electronics. Analysts say extensive buybacks could push the affiliates' combined ownership above regulatory limits, potentially forcing them to sell shares to bring their combined holding below 10%.
As a result, analysts expect much of Samsung's remaining capital allocation to be directed towards dividends rather than buybacks.
Kim Soo-hyun, head of research at DS Investment & Securities, estimated that Samsung's remaining 60 trillion won to 80 trillion won in shareholder returns could be used primarily for dividends, with only about 10 trillion won to 20 trillion won potentially going towards share repurchases and cancellations.
The market reaction spread across Samsung's affiliated companies. Samsung Life fell 9.9%, while Samsung Fire & Marine Insurance declined 8%.
SK Hynix Sets a Higher Bar
Samsung's announcement was also overshadowed by the more aggressive shareholder-return plan unveiled by SK Hynix.
The rival chipmaker said it would buy back and cancel 40 trillion won worth of treasury shares and allocate more than 50% of its free cash flow generated between 2025 and 2027 towards increasing shareholder returns.
SK Hynix shares fell about 2.5% on Monday, although the decline was considerably smaller than Samsung Electronics' plunge.
The broader benchmark KOSPI index was down 3.1%, reflecting wider pressure across South Korean equities.
The contrasting market reactions highlighted investors' growing focus not only on how much cash companies generate from the AI boom, but also on how effectively that money is returned to shareholders.
Samsung Leaves Future Payouts Open
Samsung said its board will determine the remaining shareholder payouts in January 2027.
Cash dividends, share buybacks and share cancellations will all be considered as part of that decision, leaving investors to wait for greater clarity on the company's longer-term capital allocation strategy.
The announcement also puts increased attention on Samsung's next shareholder-return framework, which is due to take effect next year.
“Big capital returns, slightly below expectations,” Morgan Stanley said in a report, adding that investors would need to closely monitor the company's next capital-return framework.
For Samsung, the challenge now extends beyond delivering record profits from the AI-driven chip cycle. Investors are demanding evidence that those profits will translate into stronger and more predictable returns.
The company's ability to balance dividends, buybacks and its broader investment needs could therefore become a major factor in determining whether its shares can regain momentum after Monday's sharp decline.