AI is driving an upgrade in production capacity! Samsung and SK Hynix sign long-term contracts to secure supply, memory prices may be pushed up by "contractualization".

```

Long-term supply agreements are becoming a driver that pushes prices higher, rather than simply stabilizing market fluctuations.

Driven by AI demand, Samsung Electronics and SK Hynix are increasing their efforts for multi-year supply agreements (LTA). Major customers are willing to pay a premium to secure capacity, while those without contracts may be forced to bear higher costs in the tightening spot market. Analysts believe that the widespread adoption of LTAs could systematically raise the central level of memory prices.

How Long-Term Agreements Raise Prices in Reverse

Samsung Electronics stated in its latest earnings call that, based on strong expectations for AI demand, major customers are actively seeking to lock in medium- to long-term supply volumes, and the company has already signed several multi-year contracts.

According to analysts, the original intention of LTAs is to reduce cyclical volatility in the industry. However, under the current tight supply situation, contract parties pay a premium for certainty, while non-contract parties passively accept higher spot prices—both sides pushing price levels up simultaneously.

The Financial Times pointed out that the current memory market is already a "seller's market," and the supply-demand imbalance may last until at least 2028. Analysts predict that if memory prices rise 50% quarter-on-quarter in the second quarter, manufacturers' profit margins could exceed 80%. Moreover, the expansion of three- to five-year LTAs is expected to weaken the industry's reliance on cyclical businesses such as smartphones and PCs.

Advance Payment Increased, Price Floor Written into Contracts

Korean memory manufacturers are raising the advance payment ratio for LTAs, which previously was generally less than 5% in the industry. Recently, SK Hynix’s long-term agreements with Microsoft and Google have increased prepayments to between 10% and 30% of the total contract value, and have set minimum price clauses within the contract period. If buyers sign contracts but fail to take delivery as agreed, the advance payment will be forfeited as a penalty.

Specifically, the core of the SK Hynix-Microsoft agreement is a three-year DDR5 supply starting this year, with the contract expected to reach several billion dollars; talks with Google involve a five-year general DRAM agreement, possibly with a two-year extension clause, linked to next-generation HBM supply.

Risk Warning and DisclaimerThe market carries risks and investment needs caution. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial status, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their specific conditions. Investments based on this are at your own risk. ```