The eye-popping shareholder return programs from Samsung Electronics and SK Hynix have become an early litmus test for corporate reform in South Korea. While investors welcome the windfall, they also point out that much more is needed to narrow the valuation discount that has plagued the country for decades.

The artificial intelligence-driven boom has made the nation's two chip titans flush with cash, fueling investor demand for higher payouts. Yet even with combined programs valued at over 130 trillion won (approximately $97 billion) this year alone, expectations remain only partially met. The benchmark KOSPI index, where these two companies account for nearly half of the weighting, still trades about 26% below its June record high.

The lukewarm market reaction underscores the challenges facing the "Value-Up Program" launched by President Lee Jae-myung in 2024. The initiative aims to address the so-called "Korea discount" — a situation where domestic stocks trade at lower valuations than global peers due to concerns over corporate governance, capital allocation, and shareholder rights. Clarence Li, chief portfolio analyst at T. Rowe Price, noted that the discount is unlikely to vanish simply because Samsung and Hynix boosted cash returns. He added that the issue remains partly structural, requiring more companies to consistently demonstrate alignment with the program's requirements, though he acknowledged the plans represent a step in the right direction.

South Korea's stock market has been among the world's best performers this year, surging as much as 67% on AI enthusiasm and rising earnings expectations. Even so, according to Goldman Sachs data, the KOSPI trades at just 4.3 times expected 2027 earnings — the cheapest valuation multiple in the region, far below the Asia-Pacific index's 11 times. This gap highlights the long road ahead for lifting corporate valuations, with investors unconvinced that other companies will follow the chipmakers' lead.

Sammy Suzuki, head of emerging market equities at AllianceBernstein, drew a clear distinction between the massive absolute returns from Samsung and Hynix and the success of the Value-Up Program. She argued these huge payouts largely reflect the exceptional memory chip cycle and resulting cash flows rather than a fundamental shift in capital return philosophy, which partly explains why investors keep asking whether this is enough.

The fatal weakness

Despite Samsung's record-breaking payout plan being hailed as a milestone, some investors and analysts say the policy lacks detail and may rely heavily on special dividends that appear to benefit the controlling family more than minority shareholders. Samsung will distribute roughly 30 trillion won in cash dividends this quarter as part of its planned 90-110 trillion won return program through 2026, with details on the remaining capital returns to be finalized by January.

Kim Kyu-shik, portfolio manager at Singapore-based hedge fund Vista Global Asset Management, expressed deep disappointment with Samsung's announcement. He noted the absence of any share buyback commitment, calling it a negative signal that Samsung doesn't believe its stock is undervalued. He also described the conglomerate's ownership structure as an "Achilles' heel" that limits its ability to repurchase shares.

Large-scale buyback and cancellation programs could push major shareholders Samsung Life and Samsung Fire & Marine Insurance above regulatory ownership limits, potentially forcing them to reduce stakes below 10%. Analysts and investors say such a move could trigger closer regulatory scrutiny of Samsung Electronics' ownership structure and undermine the Samsung family's control over its core asset.

Samsung responded in a statement that its shareholder returns are shareholder-centric and that whether financial affiliates sell shares to comply with regulations was not a consideration in the decision. The company emphasized that buybacks are one of several available tools rather than the only option, noting its 2026 plan already includes substantial cash dividends, and reaffirming its commitment to a return policy encompassing both dividends and buybacks/cancellations.

What about the others?

Investors say the long-term success of the Value-Up Program, designed to push companies toward better governance and optimized capital allocation, will depend on whether others follow suit — especially given the program remains voluntary.

Aadil Ebrahim, head of equities at Klay Group, expressed disappointment with the current announcements, suggesting Samsung should be more aggressive with buybacks than dividends. He warned that many other companies might question why they should bother if even the top two aren't doing more.

Signs of change are emerging. Korea Exchange data shows companies have announced 39 trillion won (about $29.1 billion) in buyback programs year-to-date, surpassing the combined total for 2024 and 2025. Yi Ping Liao, portfolio manager at Templeton Global Investments, noted companies increasingly face consequences for poor capital allocation, citing minority shareholder pressure on those proposing splits, acquisitions, or rights issues unfavorable to minority interests.

Nevertheless, investors caution that structural challenges persist, including board oversight, concentrated ownership, chaebol cross-holdings, and protection of minority shareholder rights. Liao believes the onus is on companies to formulate and execute their own value-up plans, noting the conversation has shifted from policy reform to implementation.