Samsung Electronics has announced a 10 trillion won stock buyback program, marking one of the largest in its history. The initiative aims to boost shareholder value amid growing investor concerns.
Stock Buyback Program
The buyback program will occur in stages over the next 12 months. Initially, Samsung will repurchase approximately 3 trillion won worth of shares starting Monday, continuing until February 2025. All shares repurchased in this phase will be canceled, effectively reducing the number of outstanding shares. The board will later determine the best approach for buying back the remaining 7 trillion won worth of stock.
Memory Chip Market Competition
The buyback decision comes amid growing investor concerns about Samsung's memory chip business, which is facing tough competition from SK Hynix. SK Hynix has emerged as a dominant supplier of high-bandwidth memory chips to Nvidia, which uses these chips in its AI accelerators. This has raised concerns that Samsung, historically a leader in the global memory semiconductor market, is lagging in the rapidly expanding AI sector.
Challenges for Company Growth
Samsung's stock has struggled this year, down 32%, despite a recent 8.6% rise following the buyback announcement. The company's valuation remains at a significant discount, trading more than 10% below its consensus one-year forward book value. In addition to competitive challenges in the semiconductor market, Samsung is also facing a broader slump in consumer electronics demand globally, adding to investor concerns. In response to these market pressures, Samsung has been working to qualify and supply its most advanced HBM3E memory chips to Nvidia, with plans to begin sales in the fourth quarter of this year. However, some investors remain cautious, noting that it will take time for Samsung to catch up in the high-bandwidth memory space and are concerned about ongoing trade risks, especially with the company's exposure to China.
While the buyback program may provide short-term support for the stock price, long-term growth will depend on how well Samsung navigates these competitive and geopolitical challenges.
