Holding hundreds of billions in cash yet reluctant to give back? Analysts openly pressure, SK Hynix (SKHY.US) plans to finalize its shareholder return plan in Q3.

South Korean chipmaker SK Hynix (SKHY.US) announced on Friday that it will distribute a dividend of 375 Korean won per share. The company also stated that it is actively evaluating measures to enhance shareholder value further, with specific details to be finalized and announced in the third quarter. In fact, the two major memory chip giants in South Korea had previously signaled an increase in shareholder returns. Samsung, in its second-quarter earnings report released on July 30, indicated that its board of directors and management were actively discussing specific measures for this year's shareholder return policy, including the distribution of a special dividend and the next round of shareholder return plans. SK Hynix also expressed that it is considering various ways to enhance shareholder returns further. As the AI storage boom drives profits for both companies, market expectations for dividends have risen accordingly. Both Samsung and SK Hynix reported record high operating profits in the second quarter, primarily due to strong demand for High Bandwidth Memory (HBM). Samsung's operating profit for the first half of the year was approximately 146 trillion won (about $105.9 billion), while SK Hynix reached approximately 98 trillion won (about $71.1 billion). According to LSEG data and calculations, the combined net cash reserves of Samsung and SK Hynix are expected to reach $263 billion by the end of this year, more than twice that of NVIDIA Corporation's approximately $102 billion, and exceeding the total cash of the remaining six companies among the U.S. tech giants. Holding enormous cash while reporting skyrocketing profits yet being stingy with dividends? Analysts are publicly calling for increased returns. Brokerage firms estimate that Samsung's free cash flow for this year will be around 200 trillion won (about $145 billion), while SK Hynix's free cash flow is expected to reach about 100 trillion won. Both companies plan to allocate 50% of their free cash flow to shareholder returns. However, U.S. memory chip giant Micron Technology, Inc. had committed to raising this ratio to 100% as early as June this year, leading many investors to express dissatisfaction due to the stark contrast. Analysts believe that the disparity between robust performance growth and restrained dividends leads the market to speculate that management does not view the current AI storage boom as sustainable in the long term. This has also been a significant factor in the substantial pullback of the stock prices of South Korea's two chip giants from their historical highs. J.P. Morgan lowered its price target for SK Hynix this week, stating that "a clear capital allocation stance is crucial for restoring market confidence." Richard Claude, a fund manager at asset management firm Janus Henderson, also publicly called out that adhering to a 50% free cash flow return ratio would significantly reduce the efficiency of the company's balance sheet capital utilization. He urged SK Hynix to raise the shareholder return ratio to 80% or above.