Samsung Electronics Wage and Collective Bargaining Agreement Rejected, Amid Shareholder Return Expansion and Semiconductor Risk Peak-Out Diagnosis

With the rejection of Samsung Electronics' tentative agreement on wage and collective bargaining, the market expects a short-term negative impact on the stock price. The rejection was decided by a narrow margin, with 49.9% in favor and 50.08% against. This makes renegotiations between labor and management inevitable, raising concerns among investors about future uncertainties.

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Major domestic corporations, Samsung Electronics and SK Hynix, have announced large-scale shareholder returns exceeding 100 trillion won in the future. In particular, the separate taxation for dividend income implemented this year is expected to bring significant tax savings for high-income earners. For companies with sufficient dividend resources, the benefits of the separate taxation system can be maximized when the dividend payout ratio is around 40%. Through this, high-net-worth individuals are expected to reduce their tax burden on dividends and increase their effective returns.

Samsung Electronics and SK Hynix show differences in their shareholder return policies. While SK Hynix has already acquired and retired its treasury shares, Samsung Electronics has primarily announced a dividend policy. Samsung Electronics stated that it would finalize and announce additional plans for utilizing shareholder return resources between January and April of next year, after the year-end closing. This is interpreted as a strategic choice based on the financial situation and governance structure of both companies.

Share buybacks are considered an effective shareholder return method that enhances capital efficiency without the tax burden associated with dividends. While dividends are subject to income tax for shareholders, share buybacks reduce the number of outstanding shares without changing the company's capital, thereby increasing earnings per share. This, in turn, can lead to an increase in corporate value and provide downside support for the stock price.

One of the main reasons Samsung Electronics finds it difficult to actively engage in share buybacks is the Financial Industry Separation Act. This law restricts industrial capital from holding more than 10% of a financial company's shares. As Samsung financial affiliates, such as Samsung Life Insurance, hold shares in Samsung Electronics, if Samsung Electronics acquires and retires its own shares, the shareholding ratio of financial affiliates in Samsung Electronics could relatively increase, leading to legal issues. Due to these restrictions, alternative methods such as block deals or preferred share acquisitions are being discussed.

The retirement of preferred shares is being discussed as an alternative to avoid the restrictions on Samsung Electronics' share buybacks. Since preferred shares do not have voting rights, they are relatively free from issues related to the Financial Industry Separation Act caused by changes in the shareholding ratio of financial affiliates. Furthermore, retiring preferred shares can prevent the dilution of common stock, thereby protecting the value of existing shareholders. In situations where the preferred share discount is significant, as seen in past Mirae Asset cases, preferred share retirement can be an even more advantageous strategy.

Separate taxation for dividend income offers significant tax savings for high-net-worth individuals. A 20% tax rate applies when dividend income exceeds 20 million won, and for ultra-high-net-worth individuals exceeding 5 billion won, the top tax bracket is eased from 50% to 30%. This system is analyzed to reduce the tax burden on high-net-worth individuals, enhancing the appeal of dividend investments.

This year marks the first year of implementing separate taxation for dividend income, and its benefits are expected to be fully felt starting next May during the comprehensive income tax filing period. This system can encourage the movement of funds from bank deposits to the stock market and increase the attractiveness of high-dividend stocks. In particular, the reduced tax burden on high-net-worth individuals is likely to further stimulate investment in dividend stocks.

Taiwan implemented separate taxation for dividend income in 2018, which led to a concentration of IT leader stocks in the Taiwan stock market. Similar to TSMC accounting for about 40% of the Taiwan Weighted Index, a structural phenomenon emerged where IT companies drove stock market growth. This case suggests that the introduction of separate taxation for dividend income could further expand the influence of IT-leading companies in the Korean stock market as well.

While share buybacks have the effect of supporting the stock price during the acquisition process, a supply-demand imbalance can occur immediately after the announcement due to selling pressure from foreign investors. Even after a treasury stock acquisition announcement, the stock price can fluctuate due to attacks from short hedge funds or pressure from global asset allocation adjustments. Therefore, the impact of share buyback policies on stock prices must be analyzed carefully from a long-term perspective.

Semiconductor companies currently leading the market, such as Nvidia and TSMC, have also experienced significant declines from their past peaks. Nvidia plunged to 10.8 dollars after peaking at the end of 2021, and TSMC also experienced a correction of more than 50% from its past peak. This serves as a realistic warning to investors in domestic semiconductor companies like Samsung Electronics and SK Hynix that even market leaders can fall by more than half from their peaks. Therefore, a mindset of investing based on belief in the company's intrinsic value from a long-term perspective is crucial.

Analysis suggests that current market risk is passing its peak. Although it is a difficult period, the index has formed a bottom and is showing a rebound. This is similar to the pattern seen in past big tech companies that underwent corrections of over 60% before growing again. Experts predict that once the current difficult situation passes, a positive market trend can be expected.

Recent rumors expressing concern about SK Hynix's HBM yield were refuted as an excessive interpretation. HBM requires highly complex stacking technology for 12-layer, 16-layer, and other wafers, a process that demands extremely high difficulty. As a leading company in this field, SK Hynix would naturally face difficulties during technology development. It was explained that such yield issues should be understood as a temporary phase for technological advancement, rather than interpreted as a corporate crisis.

Contrary to some concerns about a decline in HBM demand, projections indicate that HBM demand will surge significantly, far exceeding expectations by 2028. According to a report published by Meritz Securities on August 19, HBM demand is predicted to increase by 30% to nearly double from 2027 to 2028. This suggests that concerns about declining HBM demand are unfounded and that the future growth potential of the HBM market is very high.

Data consumption is consistently growing by over 20% year-on-year, providing strong evidence to support the continuous increase in memory demand. The argument for demand stagnation, raised by some, is merely an illusion that overlooks the actual trend of data growth. As technological advancements such as artificial intelligence and big data accelerate, data consumption is increasing exponentially, and thus, the demand for memory semiconductors is expected to continue to rise.