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BIG: Samsung Pursues Long-Term Supply 'Lock-In' with Google and Microsoft… A New Memory Paradigm Emerges
Samsung Electronics is reportedly in talks to establish long-term supply agreements (LTAs) with Google and Microsoft. While various contract structures are under discussion, the most likely arrangement is one where large volumes are committed over an extended period with pricing remaining variable. If finalized, this would mark the first binding long-term supply contract in the industry's history — a significant historical inflection point.
◆ Big Tech Gets Desperate, Seeks Long-Term Supply Commitments
According to industry sources on the 20th, Samsung Electronics has recently been in negotiations with Google and Microsoft over long-term supply contracts. As memory has emerged as a critical bottleneck for AI data center buildouts, major tech companies are racing to secure commitments from Korean memory makers.
Despite concerns over an AI bubble, U.S. hyperscalers have continued — and even accelerated — their capital expenditure programs, exacerbating memory supply shortages. Commodity DRAM prices have surged to the point of rivaling HBM margins, prompting Big Tech to pursue LTAs with memory manufacturers in order to secure stable supply.
The exact structure of the contracts remains under discussion, but the most likely format involves fixed volume commitments with pricing linked to spot market rates. Under this arrangement, Big Tech customers would pay large upfront prepayments to Samsung, which would be drawn down if the customer fails to take the agreed volumes within the three-to-five year contract window. However, pricing would remain tied to spot prices, adjusting upward or downward if spot prices move beyond a defined range.
Memory semiconductor pricing is typically divided into spot prices and contract prices. Spot prices are determined daily by immediate supply and demand in B2C markets such as distributors and small-to-medium PC assemblers. Contract prices, on the other hand, serve as the benchmark for large-scale supply deals between manufacturers like Samsung Electronics and SK Hynix and major global firms such as Apple and Amazon.
Under this type of structure, Samsung would gain long-term demand visibility, enabling it to accelerate capacity expansion while avoiding inventory buildup — thereby preventing the steep price declines seen in past cycles. "This long-term supply agreement is essentially a green light to expand capacity," said one industry official. "By committing to large volumes over an extended period, manufacturers will be able to invest with confidence."
Micron is also inking long-term supply agreements. In its fiscal Q2 2026 earnings call, Micron disclosed that it had "signed its first-ever five-year Strategic Customer Agreement (SCA)." SK Hynix is also said to have already reached LTAs with select customers, and it is expected that memory manufacturers will have concluded agreements with all major hyperscalers by mid-year.
In response, a Samsung Electronics representative said, "We are unable to confirm details related to specific customers," while adding, "All major customers are currently requesting large volumes of memory."
◆ "This Time Is Different" — Prepayment First, Supply Later
The significance of these contracts lies in the potential paradigm shift they represent for the memory industry. Historically, the sector has been plagued by periodic down-cycles driven by the mismatch between large-scale capacity additions and fluctuating demand.
Long-term supply agreements, however, would provide more than three years of demand visibility, allowing companies to invest with confidence and maintaining margins at reasonable levels by preventing dramatic price declines.
The defining feature of this round of LTAs is their enforceability. While long-term contracts were attempted around 2019, they carried no binding force — customers could cancel orders at will. This year's agreements, by contrast, enforce commitment through large upfront prepayments. "My understanding is that Samsung is in discussions to receive over $10 billion in prepayments from Microsoft, with the prepayment balance drawn down if Microsoft fails to take the agreed volumes," said another industry source.
The successful conclusion of LTAs is expected to drive further expansion of Samsung's investment plans. With demand visibility materially improved, there is little reason to hesitate on capex. Micron, for its part, has already announced plans to invest over $25 billion in fiscal 2026 — nearly double the $13.8 billion invested the prior year.
At Samsung's annual general meeting on the 18th, Vice Chairman and CEO Jeon Young-hyun stated: "For the semiconductor division, it is critically important to minimize uncertainty in our medium-to-long-term business and maintain a healthy supply-demand balance in memory. By securing long-term supply through multi-year agreements, both our customers and ourselves can enhance predictable business stability and visibility."
