Memory Market Undergoes Seismic Shift: Samsung, SK Hynix Reshape Contracts Amid Soaring Prices

Global - Ekhbary News Agency

Memory Market Undergoes Seismic Shift: Samsung, SK Hynix Reshape Contracts Amid Soaring Prices

The global memory chip industry is undergoing a seismic shift in its pricing and contractual dynamics, driven by an unprecedented surge in demand for artificial intelligence (AI) infrastructure and persistent supply constraints. Leading manufacturers, including Samsung, SK Hynix, and Micron, have begun to pivot away from traditional long-term, fixed-price supply agreements, instead favoring shorter contracts and post-settlement pricing mechanisms that more accurately reflect market fluctuations. This fundamental change is reasserting pricing power for suppliers and is set to reshape the industry's financial landscape.

Historically, long-term contracts offered large buyers, particularly data centers and device manufacturers, significant cost certainty and stability against market volatility. However, the sharp upswing in DRAM and NAND pricing over recent months, largely attributed to the immense demand from the AI sector and supply limitations at advanced nodes, has inverted this dynamic. Suppliers are now in a position to dictate more favorable terms, prompting a move towards agreements measured in quarters or even months, rather than the customary six to twelve-month periods.

A key innovation in this transition is post-settlement pricing. Under these arrangements, products are delivered at an initially agreed price, but the final payment is adjusted at the end of the contract term to reflect prevailing market rates. This means that if prices rise materially, as has been the case with DRAM recently, customers bear the additional cost. Conversely, suppliers absorb the loss if prices fall. The willingness of all three major memory makers to adopt such contracts strongly signals their confidence in sustained elevated prices for the foreseeable future.

These contractual shifts come at a time when recent analyses, such as those from ZDNet, project astonishing operating margins for NAND suppliers. Samsung and SK Hynix, for instance, are forecast to achieve NAND operating margins of 40-50% in the first half of 2026. These levels would have seemed implausible during the oversupply conditions witnessed in 2022 and early 2023. Such robust margins are predicated not just on higher prices, but also on disciplined supply management and a strategic willingness to walk away from unfavorable contracts.

Even major buyers who once wielded immense negotiating power are facing challenges. Apple, for instance, traditionally capable of securing highly advantageous deals, has reportedly shifted its memory price negotiations from a six-monthly to a quarterly cadence, according to TF International Securities analyst Ming-Chi Kuo. Analysts suggest that Apple may be willing to absorb higher memory costs to protect shipment volumes, even considering keeping starting prices for its planned iPhone 18 lineup largely unchanged for consumers.

This paradigm shift is not merely a temporary response to current market conditions but indicative of a deeper structural change in how memory is allocated and sold. The balance of power has firmly moved back towards suppliers, causing contract terms to adjust accordingly. However, it is crucial to note that memory remains a cyclical, capital-intensive industry, and periods of high profitability tend to attract overinvestment, which could eventually lead to another cycle of oversupply. But for the medium term at least, suppliers appear to be prioritizing margin discipline and pricing flexibility over volume stability.

These developments underscore that the era of long, fixed-price contracts is largely over, replaced by a more dynamic system that directly reflects market volatility. This places buyers in a more vulnerable position while ushering in a new era of profitability for memory manufacturers, fueled by the relentless demands of the AI revolution.

Ekhbary News Agency