Memory demand and production gains drive earnings surge

Samsung Electronics, SK hynix face pressure to boost shareholder returns

[Reuters]
[Reuters]

Chinese memory chipmaker CXMT is forecasting a sharp earnings surge on the back of an AI-driven memory boom and is now pushing ahead with a share buyback of up to 400 billion won ($297 million). The Chinese company, whose technological advances have rattled shares of South Korea's major semiconductor stocks, is drawing growing investor attention by combining strong earnings growth with a shareholder-return push.

CXMT projected third-quarter revenue of 114.7 billion to 119.7 billion yuan ($17.9 billion), a year-on-year increase of 589 to 619 percent, according to Chinese financial outlets including Kechuangban Daily and Yicai on Saturday (local time). That would represent a 15 to 20 percent rise from the second quarter. Cumulative revenue for the first three quarters of this year is expected to reach 265 billion to 270 billion yuan, up 725 to 741 percent from the same period last year.

CXMT attributed the steep earnings growth to a combination of surging AI infrastructure investment, which has lifted memory demand, and improved production efficiency. The company said demand for DRAM computing capacity accelerated rapidly from the second half of last year, leaving supply unable to keep pace and pushing product prices sharply higher. It also cited capacity expansion, research and development, and advances in process technology as factors that raised wafer output and equipment utilization rates.

Alongside the earnings outlook, CXMT unveiled a shareholder-return move. Chairman Zhu Yiming proposed on Friday that the company use its own equity or internally raised funds to buy back 1 billion to 2 billion yuan worth of shares — equivalent to roughly 200 billion to 400 billion won. The company said the move was aimed at protecting investor interests and boosting market confidence, reflecting its conviction in the company's long-term development.

The proposed buyback is large by the standards of companies listed on China's STAR Market, the country's NASDAQ-style exchange, where buybacks typically range from 200 million to 800 million yuan. CXMT's freely tradable float stands at only around 6 percent of total shares outstanding. A maximum buyback of 2 billion yuan would further reduce the available supply, providing additional support for the stock. The actual impact on the share price, however, will depend on the final size and whether the buyback is fully executed.

CXMT's share price has been volatile even as global semiconductor stocks have broadly weakened. The stock fell 5.24 percent on Thursday, pushing its market cap below 3 trillion yuan, but rebounded 3.28 percent on Friday to reclaim the 3 trillion yuan threshold and retake the top spot by market cap on China's mainland exchanges. The company raised up to 66.61 billion yuan through its initial public offering in July, and its shares surged on the first day of trading to make it the largest company by market cap on the mainland.

Share buybacks have also been a key issue for South Korea's major semiconductor stocks, including Samsung Electronics and SK hynix. Samsung completed its buyback program on Oct. 6, and SK hynix is expected to wrap up its own program this month, fueling expectations for additional shareholder-return measures. As the two companies' buybacks have helped absorb selling pressure from foreign and retail investors and supported the market floor, attention is now turning to whether further return announcements will follow.

SK hynix is set to disclose the scale and method of additional shareholder returns when it reports third-quarter earnings on Oct. 27. The company had earlier decided to buy back and cancel all 40 trillion won worth of its own shares and pledged to return more than 50 percent of cumulative free cash flow from 2025 through 2027 to shareholders. Samsung Electronics announced this year's shareholder-return budget at 90 trillion to 110 trillion won, with the specific size and method for the remaining funds to be decided in January next year.


kacew@heraldcorp.com