A one-year contract is now a thing of the past; Samsung and SK Hynix only sell with long-term orders of 3-5 years.

```

Samsung Electronics and SK Hynix have decided to abandon the annual or even quarterly short-term supply contract model they have used for years, and instead require major global technology clients to sign 3 to 5-year long-term supply agreements (LTA). This change marks a fundamental restructuring of the business logic in the memory industry.

According to Korean media ajunews on Thursday, starting this year, Samsung will fully apply a minimum 3-year LTA framework to new contracts with key clients, and major customers such as Microsoft and Google are expected to stably receive three-year memory supplies under this system. Meanwhile, SK Hynix is in negotiations with Google for a general DRAM long-term supply agreement of up to five years, with talks expected to conclude within the first half of the year.

Jeon Young-hyun, Vice Chairman and CEO of the DS division of Samsung Electronics, clearly stated at the regular shareholders' meeting on March 18 that the company is promoting the conversion of its supply contracts with clients from the current annual and quarterly model to multi-year contracts of 3 to 5 years.

For investors, this change means that the performance of the two companies will have stronger downside protection. Even if market demand suddenly declines, locked-in prices and shipment volumes can still buffer revenues, and the long-standing "cyclical curse" troubling the memory market may be systematically alleviated.

Samsung pushes full-scale LTA transformation, SK Hynix negotiates five-year contract with Google

According to industry sources, Samsung Electronics has established a policy: Starting this year, new contracts with major customers will fully adopt a mechanism of at least 3 years under the LTA. This stands in sharp contrast to past practices—just last year, Samsung still accepted ultra-short-term quarterly contracts.

Jeon Young-hyun's statement at the shareholders' meeting provided the highest-level backing for this policy shift. He pointed out clearly that the company is actively pushing from "annual·quarterly contracts" to "multi-year contracts of 3 to 5 years." Under this framework, key clients such as Microsoft and Google are expected to receive memory products on a three-year cycle.

SK Hynix's moves are even more aggressive. Reportedly, the company is advancing a general DRAM long-term supply contract with Google for up to five years. Previously, the market generally expected the contract term to be three years, but SK Hynix's internal view is that "three years is still too short," so the target term was extended to five years.

The bargaining chip lies in: SK Hynix is currently Google's first-choice supplier for the fifth-generation high-bandwidth memory (HBM3E), and the two sides are discussing a plan to extend the contract by two years in exchange for the next-generation HBM supply commitment. The original talks scheduled for completion within the year have already been moved up to close in the first half.

Farewell to the "cyclical curse," LTA reshapes the profitability structure of the memory industry

In the past, the memory market was based on "generality"—mass production of standard DRAM for PCs and smartphones, delivered at fixed quarterly prices or daily floating spot prices. This mode caused prices to plummet with even slight fluctuations in demand, companies often suffered trillions of won in losses, and suppliers were in a perpetually passive and pressured position.

The core value of the LTA system lies in locking in risk exposure. By locking in shipments and prices for 3 to 5 years in advance, even if the economy declines and demand sharply shrinks, companies can still maintain performance with existing contracts, thus gaining "downside rigidity" in profits.

On the capital expenditure front, LTA similarly brings greater efficiency. Once shipment volumes are determined, companies can abandon blind expansion competition and implement precisely calculated equipment investments. The industry widely believes that as the proportion of long-term contracts increases, memory companies’ profit margins will remain stable at a higher level.

For products such as HBM, which are technically difficult and have strong customer customization needs, the "order first, then produce" model is especially key—not only can it eliminate inventory pressure at its source, but it also improves mass production efficiency and builds a customized supply system similar to wafer foundries.

An industry insider said, "The era of memory companies worrying about price drops and warehouse inventory backlog is over," "Samsung Electronics and SK Hynix have now transcended the role of pure memory suppliers and become strategic infrastructure partners for large global tech companies."

Risk disclaimer and warningThe market involves risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial condition, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. Investments made accordingly are at your own responsibility. ```