Samsung is reportedly looking for customers eager to enter into 'multi-year' memory contracts by offering a slight discount at the outset.
Samsung Intends to Lock In DRAM Supply For Several Years, Likely to Prevent Overinvestments
The memory industry has been experiencing an unprecedented demand cycle over the past few quarters, as enterprise demand is through the roof, pushing DRAM contract prices to new levels. While suppliers are immensely benefiting from the current situation, there are concerns that the aggressive demand will end. To ensure the cycle's volatility doesn't affect suppliers more, Samsung is reportedly locking suppliers into surprise three- and five-year contracts, as the company believes they can factor in price changes "early on".
We are now working with our major customers to shift this transaction environment toward fixed-term supply contracts, three- to five-year contracts. We expect to be able to identify fluctuations [in the market] early on and, because we are aware of them in advance, we will be able to flexibly adjust our investment scale accordingly.
- Samsung's CEO Jun Young-hyun (Nikkei Asia)
This is a significant change from what Samsung did a few months ago, when it was reported that the company didn't even have room for quarterly contracts, let alone multi-year ones. It is claimed that the idea behind such contracts is simple: Samsung wants to ensure it has a long-term view of memory demand, which would not only help with financial projections but also with expansion plans. And for customers, the Korean giant plans to offer a "slight discount" on DRAM prices from current levels, allowing them to secure demand that is essentially free of uncertainties.
The new contract also ensures that Samsung keeps DRAM pricing steady for several years to come by "locking" in its peak shortage levels. Even if memory demand declines in the longer term, customer contracts would ultimately allow Samsung to maintain consistent revenue, which has been a problem for it in previous demand cycles as well. For a consumer, this means earlier projections of the DRAM cycle ending by 2027-2028 could be pushed even further, since all the produced supply would be locked up by manufacturers.
In a previous report, we discussed how Samsung was reconsidering its DRAM production plans amid evolving industry demand, suggesting that suppliers are seeking to avoid over-investment. The multi-year contract model also ensures steady demand, but for consumers, it means shortages could extend even further.
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.
Follow Wccftech on Google to get more of our news coverage in your feeds.
