Big Tech companies are racing to secure memory chips years in advance as the shortage of chips for artificial intelligence data centers drags on. Micron Technology expanded its long-term contracts by more than 60% in a single quarter, while Samsung Electronics (005930) and SK hynix (000660) are widening five-year deals with major customers.
Micron said on the 1st, in its third-quarter earnings release, that it had signed a total of 26 strategic customer agreements. An SCA is a long-term agreement, or LTA, in which Micron sets multiyear volume and price terms with a major customer in advance.
The company had signed only 16 SCAs as of the second quarter. That number rose by 10 to 26 in the third quarter. The share of projected company revenue through 2030 covered by those contracts also climbed to more than 35% from about 25%. Some new agreements run through 2031, and two existing contracts were extended by a year to 2031.
The deals have also grown larger. Remaining performance obligations rose 50% to $150 billion from $100 billion. RPO represents the minimum volume customers have committed to buy, valued at the minimum prices set in the contracts. Micron said the increase reflects the expansion of its long-term agreements. Financial commitments including customer cash deposits rose to $32 billion from $22 billion.
Pricing terms have become more specific as well. About 75% of the revenue expected from long-term contracts is covered by pre-set pricing mechanisms such as fixed prices or price floors and ceilings. The rest is repriced periodically based on market rates. The structure protects profitability by preventing prices from falling below a certain level even if demand drops sharply.
Samsung Electronics is moving in the same direction. In its second-quarter earnings release in July, Samsung said it had signed long-term supply agreements with its top five global data center customers and was in final-stage talks with five more major customers. The base contract term is five years, with the option to add a year at a time by mutual agreement. Once the deals under negotiation are completed, the company said long-term contract volumes would account for 60% to 70% of the DRAM and NAND capacity in its medium- to long-term production plan.
SK hynix had wrapped up long-term contract talks with about 10 companies, including major customers, as of the second quarter. The contracts typically run about five years. The company applies different pricing structures depending on the customer and product while limiting exposure to short-term price swings, and it pairs volume commitments with enforcement mechanisms such as deposits. SK hynix did not disclose what share of total revenue LTAs would account for.
The expansion of long-term contracts is also reshaping how memory makers invest. Micron said more than 75% of next year's output has already been allocated to customers and that key supply negotiations have moved on to 2028 volumes.
Citing that long-term demand visibility, the company decided to raise capital spending for fiscal 2027 above its earlier plan. Micron plans to invest $11.5 billion in the first quarter of fiscal 2027 and about $25 billion in the first half, with more to follow in the second half. Annual capital spending is expected to top $50 billion, an increase of more than 85% from $27 billion a year earlier. Much of the increase will go toward construction to secure cleanroom space ahead of demand expected after 2028.
Micron management said long-term contracts "improve visibility into future demand and help us plan long-term investment and supply."
