Semiconductor Firms With Billion-Won Bonuses: Is a 'Half Glass of Soju' Enough for Dividends?

Shareholders of South Korean tech giants Samsung Electronics and SK Hynix are voicing strong discontent over what they perceive as inadequate returns on their investment. While the companies have reported astronomical profits driven by a semiconductor boom, and employees have been rewarded with bonuses reportedly reaching hundreds of millions of won per person, shareholders feel they are being shortchanged.

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Shareholders of Samsung Electronics and SK Hynix are protesting meager dividends despite the companies' astronomical profits and employees receiving multi-billion won bonuses.

SK Hynix recently announced a second-quarter cash dividend of 375 won per share, following Samsung Electronics' announcement of a 374 won dividend per share. With stock dividend yields hovering around 0.01% to 0.02%, these payouts have been derisively labeled "candy money" or "half a glass of soju money" by disgruntled investors. The disappointment is particularly acute as many had hoped for more generous shareholder returns given the recent stock price declines and improved company performance.

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With stock dividend yields hovering around 0.01% to 0.02%, these payouts have been derisively labeled 'candy money' or 'half a glass of soju money' by disgruntled investors.

Both companies operate under a three-year shareholder return plan. Samsung Electronics allocates 50% of its free cash flow for annual regular dividends totaling 9.8 trillion won, while SK Hynix distributes 1,500 won per share quarterly based on the same principle. However, under these existing plans, quarterly dividends are unlikely to exceed the 300-400 won range. This structured approach seems to be a significant factor contributing to the "Korea Discount," a phenomenon where South Korean stocks trade at a lower valuation compared to their global counterparts with similar financial results.

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This insufficient shareholder return contributes to South Korea's 'Korea Discount' phenomenon, where stock prices lag behind those of global peers with similar performance.

In contrast, major U.S. tech and semiconductor firms typically implement aggressive shareholder return strategies immediately following performance improvements. Japanese semiconductor firm Kioxia recently announced plans for up to 800 billion yen (approximately 7 trillion won) in share buybacks alongside a stock split. Given that Samsung and SK Hynix are achieving significantly higher profits than Kioxia, the demand for increased dividends and share buybacks or cancellations is understandable. While semiconductor companies require substantial investment even during downturns, the imbalance in profit distribution, where employees and management immediately share in the prosperity while shareholders are asked to wait for long-term gains, lacks persuasive justification. If cash dividends are a concern, alternative methods like share buyback cancellations or stock splits could be employed to enhance shareholder value.

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The imbalance in profit distribution, where employees and management immediately share in the prosperity while shareholders are asked to wait for long-term gains, lacks persuasive justification.