South Korea’s SK Hynix has reached a tentative labor-management agreement to pay 60% of employee bonuses in company stock and the remaining 40% in cash, according to sources familiar with the matter on the 20th. The agreement will formally take effect upon approval by union members. The company declined to comment at this time.

Under the tentative agreement, employees would receive stock equivalent to 40% of their total bonus in 2027, according to the sources. The remaining 20% in shares would be deferred and distributed in installments across 2028 and 2029. No restrictions will be placed on the sale of the shares. The remaining 40% of bonuses will be paid in cash in 2027.

The move comes as SK Hynix posts record profits amid surging semiconductor demand. Just a day earlier, on the 19th, the company announced a share buyback and cancellation program worth ₩40 trillion (approximately $28.7 billion)—the largest in South Korean stock market history.

Significant Expansion of Shareholder Returns

SK Hynix’s board of directors approved the ₩40 trillion buyback and cancellation program on the 19th. At the same time, the company outlined a policy to allocate at least 50% of free cash flow (FCF) generated from 2025 through 2027 to shareholder returns. The previous policy stated “up to 50%,” so the new framework effectively establishes a floor for shareholder returns.

Specific details regarding the buyback amount and methodology will be disclosed alongside the company’s third-quarter earnings announcement. The company explained the buyback rationale by stating that “the intrinsic value of the company—including business competitiveness, cash generation capability, and mid-to-long-term growth potential—is not adequately reflected in the current share price.”

JPMorgan Chase analyst Jay Kwon noted in a report that the most significant aspect of the buyback announcement is SK Hynix’s decision to raise the ceiling on shareholder returns. Kwon indicated that the company could implement at least $130 billion in additional shareholder returns by the end of next year.

Aligning Employee and Shareholder Interests

The stock-based bonus structure is seen as an effort to align employee interests with those of shareholders and strengthen incentives for mid-to-long-term corporate value enhancement. For a company like SK Hynix, which has established a leading position in the high-bandwidth memory (HBM) market for AI (artificial intelligence) applications, securing and retaining top talent is a critical source of competitive advantage.

In the semiconductor industry, performance-linked bonuses have become a key factor in the competition for talent, and the shift from lump-sum cash payments to equity compensation represents a relatively new development among South Korea’s large corporations. The absence of share sale restrictions reflects consideration for employee liquidity concerns.

SK Hynix’s shareholder return policy for 2025 through 2027 is as follows:

ItemDetailsBuyback size₩40 trillion (approx. $28.7 billion)FCF return ratioMore than 50% of cumulative FCF from 2025–27Stock portion of bonuses60% (40% in 2027, 20% in 2028–29)Cash portion of bonuses40% (paid in 2027)Share sale restrictionsNone

Note: Detailed buyback amounts and methodology to be disclosed at the Q3 earnings announcement.

Semiconductor market conditions remain robust, buoyed by expanding AI investment, and SK Hynix leads rival Samsung Electronics in the HBM segment. The company’s aggressive shareholder return measures are viewed by the market as backed by strong financial capacity stemming from solid earnings performance.

If the labor-management agreement gains union member approval, it could serve as a new model case for compensation structures among South Korea’s major semiconductor companies.