SK Hynix will repurchase $28.6 billion of its own shares, marking the largest buyback in the history of Korean corporations.

      SK Hynix plans to repurchase 40 trillion won of its own shares, approximately $28.6 billion at current exchange rates, which Korean media is labeling as the largest buyback ever announced by a publicly listed company in the country. The board approved this initiative on Wednesday, and all shares bought back will be canceled rather than retained in treasury.

      This action was anticipated. Earlier this month, SK Hynix indicated that it would introduce new shareholder return measures, although no figures were provided, causing the market's patience to wear thin.

      The buyback includes 24.07 million common shares, priced based on Tuesday's closing price of 1,662,000 won, amounting to about 3.4% of the outstanding shares. The repurchase will take place on the open market from August 20 to November 19, with SK Securities serving as the broker.

      Additionally, the company has increased its shareholder return commitment from over 50% of cumulative free cash flow for the years 2025 to 2027. It is also assessing the possibility of a higher fixed dividend and a special dividend, with further details to be announced during the third-quarter earnings report.

      The immediate trigger for the buyback was a stock price that did not reflect the company's strong results. SK Hynix reported second-quarter revenue of 79.32 trillion won, a 257% year-over-year increase, with an operating profit of 60.54 trillion won, up 557%, yielding a 76% operating margin, yet the stock dropped about 9% on that day.

      Investors were more frustrated by the lack of any payout announcement than by the performance numbers themselves. In its filing, the company stated that its competitive strength, cash generation, and long-term growth potential were not adequately represented in the current share price, a rare acknowledgment from a Korean chipmaker.

      The significant fluctuation in value is notable. SK Hynix achieved a market value of over a trillion dollars in May and peaked at around $1.31 trillion in June, but it currently stands at roughly $838 billion, reflecting a decline of approximately 40% over two months, despite the stock being up more than 500% year-over-year.

      The company is in a position to fund this buyback. As of the end of the second quarter, its net cash was about 69 trillion won, and the net debt-to-equity ratio was negative 26%. However, the headline net income for that quarter was 93.92 trillion won, which exceeds revenue and primarily results from 62.17 trillion won in non-operating gains, mainly from the Kioxia stake sale.

      The funds for the buyback come despite significant spending. The full-year capital expenditure is expected to reach the high 40 trillion won range, and the board has also approved 54 trillion won (about $38.3 billion) for the Yongin Y2 and Cheongju M17 fabs, part of a $720 billion commitment over the next decade.

      The demand outlook is supported by high-bandwidth memory (HBM), where SK Hynix holds approximately 58% market share compared to 21% each for Samsung and Micron, according to Counterpoint's first-quarter data. HBM4 entered mass production in the second quarter with yields nearing HBM3E maturity, and around ten customers have signed long-term agreements typically spanning five years.

      Pricing is also playing a significant role, with average selling prices for DRAM rising approximately 30% quarter-on-quarter and NAND prices increasing in the mid-50% range, with DRAM making up 73% of second-quarter revenue.

      “Robust demand stemming from the expansion of AI infrastructure investment combined with a constrained supply environment persisted,” stated Song Hyeon-jong, the company's president, during a July analyst call.

      Samsung is also pursuing third-quarter DRAM contract price hikes of up to 20%, indicating that the supply tightness is not unique to SK Hynix.

      Nvidia has certified SK Hynix, along with Samsung and Micron, for HBM4 supplies for its Vera Rubin platform, and reports suggest that SK Hynix holds a significant share of Nvidia’s HBM4 volume. Meanwhile, Samsung, which experienced a 19-fold increase in second-quarter operating profit due to similar demand, is facing comparable pressure to return cash to shareholders.

      Korean media had been hinting at a total shareholder return package near 100 trillion won, including dividends. However, what was approved on Wednesday pertains only to the buyback segment, with a dividend decision pending the third-quarter disclosure.