Cash reserves at South Korea's listed semiconductor companies are filling up rapidly as the artificial intelligence boom drives a memory super-cycle. Combined cash and cash equivalents at Samsung Electronics (005930.KS) and SK hynix (000660.KS) alone have surged by about 117 trillion won ($85 billion) this year, with the benefits spreading across suppliers of chip materials, components and equipment.
With forecasts mounting that the semiconductor upswing will continue for some time, expectations are growing that the sharply increased cash will be actively deployed as ammunition for large-scale capital investment, shareholder returns and mergers and acquisitions.
Samsung Electronics and SK hynix held 189.999 trillion won and 87.96 trillion won in cash equivalents and short-term financial instruments, respectively, as of the second quarter, according to investment banking sources and the companies. Those figures represent increases of 50.97% and 151.75% from the end of last year. The combined amount grew by roughly 117 trillion won this year alone, an average rise of 73%.
The warmth is spreading across the entire semiconductor sector. According to financial data provider FnGuide, cash equivalents at 138 listed semiconductor companies stood at 103.46 trillion won in the first quarter, up 26.7% from 81.67 trillion won at the end of last year. Given that cash equivalents across all listed companies rose just 2.4% over the same period, the cash buildup in the semiconductor sector stands out.
The increase in the semiconductor sector's cash exceeded the total rise in cash equivalents across all listed companies (13.4 trillion won) by more than 8 trillion won, meaning cash equivalents at non-semiconductor listed companies actually declined. Given the sharp jump in second-quarter cash and short-term instruments at Samsung Electronics and SK hynix, cash holdings at small and mid-sized listed semiconductor companies are also estimated to have risen substantially in the second quarter.
The cash surge stems from record earnings at both Samsung Electronics and SK hynix, driven by an explosion in demand for AI memory. Samsung Electronics posted second-quarter revenue of 171.5 trillion won and operating profit of 89.5 trillion won, up 130% and 1,814% from the second quarter of last year. SK hynix reported second-quarter revenue of 79.32 trillion won and operating profit of 60.54 trillion won, up 257% and 557% from a year earlier.
If chipmakers' cash-generating power keeps improving, their financial capacity for large-scale capital spending centered on AI memory and advanced processes, as well as for shareholder returns, is expected to grow further. Samsung Electronics, which recorded operating cash flow of 105.08 trillion won in the second quarter, is expected to use that base to accelerate efforts to strengthen its AI chip competitiveness.
SK hynix projected its investment this year at the high 40 trillion won range. The company is moving to bring forward the mass-production schedule for high-value products while preparing to expand capacity early at its first Yongin fab in early next year. It plans to pursue investment in a new semiconductor cluster in stages after Yongin. Even if investment needs expand, the company is expected to pursue future growth investment, financial soundness and expanded shareholder returns in parallel, based on its strengthened financial capacity.
Kim Jae-seung, an analyst at Hyundai Motor Securities, said the operating margins of South Korea's semiconductor sector are forecast to peak in the second half of this year. "If long-term agreements (LTAs) reduce margin volatility and revenue and profit expansion continue amid rising output, a second wave of strength could emerge," Kim said.
