Memory suppliers have dramatically changed the way DRAM contracts traditionally operate, according to a new report, with newer spot prices now being reflected in an 'interesting' way.
DRAM Manufacturers Have Narrowed Agreement Timelines, Limiting It To Just a Few Weeks
Well, across the industry, memory shortages have been discussed from the consumer perspective, but when it comes to players in the supply chain, the dynamics are quite different. It appears that in the era of a DRAM supply crunch, memory suppliers like Samsung, SK hynix, and Micron are all focused on one thing: maximizing profitability from their production lines. A report by the Korean media outlet ETNews reveals that suppliers are now imposing "post-settlement" terms in contracts to reflect the change in DRAM pricing.
Usually, when LTAs are involved in DRAM sourcing, customers enter into a yearly agreement, and DRAM price evaluations are performed on a quarterly basis to ensure prices are reflected accordingly. However, in today's market, DRAM contract pricing is changing rapidly, making large moves on shorter timeframes, such as daily and weekly, which is why getting into LTAs with a "price lock-in" won't yield much profit for memory manufacturers.
In order to resolve this 'trouble' on the supplier's side, it is claimed that post-settlement deals are being made, meaning that if DRAM prices rise signifcantly over the short-term agreements signed, buyers would ultimately need to pay the reflected changes at the end of the contract period. And, if you are thinking that companies like Micron could face trouble if DRAM prices reduce, well, you are wrong, since suppliers are seeing no chance of this price trend slowing down.
Several US-based tech companies are rushing to sign LTAs with memory manufacturers, and in such a situation, the race isn't against time but rather to see which client can bring in higher profits for the memory manufacturers. It won't be wrong to say that the entire DRAM industry is currently in a state of 'panic', driven by the gigantic DRAM demand driven by the AI infrastructure buildout.
About the author: Muhammad Zuhair is a hardware and technology reporter for Wccftech, specializing in the semiconductor industry and the complex interplay between technology, manufacturing, and geopolitics. His coverage focuses on the corporate strategies and technological roadmaps of industry giants like TSMC, NVIDIA, Samsung, and Intel. Zuhair's expertise lies in deconstructing complex topics such as fabrication nodes (e.g., 2nm process), the economic impact of policies like the CHIPS Act, and the strategic development of AI infrastructure from NVIDIA, AMD and Intel.
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