Shares of the South Korean memory chip titan Samsung Electronics Co., Ltd. extended their decline to 9% on Monday, following the announcement of a substantial $80 billion shareholder return program that failed to meet investor expectations. Market participants had anticipated that the chipmaking giant would distribute a larger share of the cash windfall generated by the artificial intelligence (AI) boom, while also seeking more precise guidance regarding its stock buyback strategy.

Both Samsung Electronics Co., Ltd. and its competitor SK Hynix unveiled major shareholder return initiatives last week, responding to mounting pressure from investors to share profits after the companies posted record-breaking results fueled by AI-driven chip demand. On Friday, Samsung Electronics Co., Ltd. stated that its total payout to shareholders this year would range between 90 trillion and 110 trillion won (approximately $65 billion to $80 billion), inclusive of a 30 trillion won cash dividend for the third quarter. Although this figure represents a fivefold increase over the company's previous record return set in 2020, analysts noted that the scale still fell short of market forecasts, and investors had hoped for greater clarity on the specifics of the buyback plan.

Samsung Electronics Co., Ltd. affirmed its commitment to returning 50% of cumulative free cash flow generated over the 2024-2026 period to shareholders under its current policy. In contrast, rival SK Hynix announced last week that it would repurchase and cancel 40 trillion won worth of treasury shares, while also dedicating more than 50% of its free cash flow between 2025 and 2027 to boost shareholder returns. Eugene Investment & Securities analyst Son In-joon expressed disappointment in a research note, stating, "Unlike SK Hynix, Samsung Electronics Co., Ltd. did not mention the possibility of enhancing its existing shareholder return policy, nor did it disclose a treasury share cancellation plan that could directly drive the stock price higher." At the time of writing, SK Hynix shares were down 3%, while South Korea's benchmark KOSPI index had fallen 3.3%.

Ownership Structure Limits Buyback Capacity

The market had anticipated that Samsung Electronics Co., Ltd. would implement larger-scale buybacks to boost capital returns and provide direct support for its share price. However, the company's ownership structure complicates such a strategy—a substantial buyback could push the stakes held by major shareholders Samsung Life and Samsung Fire above regulatory ceilings, forcing these affiliates to sell shares to keep their combined ownership below the 10% threshold. Consequently, DS Investment & Securities research head Kim Soo-hyun projected that the remaining 60 trillion to 80 trillion won from Samsung Electronics Co., Ltd. would likely be allocated primarily toward dividend payments, with only 10 trillion to 20 trillion won possibly designated for share repurchases and cancellations. As a result, shares of Samsung Life and Samsung Fire also tumbled by 9.9% and 8%, respectively.

Samsung Electronics Co., Ltd. said on Friday that its board would decide on the remaining return package by January 2027, taking into account cash dividends, share buybacks, and stock cancellations. Morgan Stanley commented in a report, "Capital returns are generous but slightly below expectations," while also cautioning that investors should closely monitor the company's new capital return framework set to take effect next year.