Microsoft and Google are negotiating three-year DRAM supply agreements with SK Hynix that include price floor guarantees and prepayment deposits of 10 to 30 percent of the total contract value. This development introduces mechanisms that have not been previously seen in the memory chip industry. The agreements suggest a significant shift in procurement strategies as the tech giants begin to treat DRAM as a strategic reserve amid a growing global chip shortage.
Sources indicate that SK Hynix and Microsoft are finalizing terms on a long-term supply contract for DDR5 memory beginning in 2026, valued at tens of trillions of Korean won. The contract discussions focus on implementing a price floor to mitigate risks from pricing declines during the contract term and require upfront deposits from buyers. Concurrently, SK Hynix is in talks with Google for long-term supplies of both high-bandwidth memory and general server DRAM.
Samsung Electronics is pursuing similar arrangements. Reports emerged in March that Samsung is negotiating three-to-five-year memory supply deals with Google and Microsoft, potentially involving over $10 billion in prepayments from Microsoft alone. These prepayments would adjust based on any shortfall in committed purchase volumes, ensuring security for both the supplier and buyer. Additionally, Micron Technology has announced its first five-year Strategic Customer Agreement.
The memory chip market is currently challenged by a significant shortage, exacerbated by increasing demand for AI infrastructure. DRAM contract prices surged between 90 to 95 percent quarter-over-quarter in the first quarter of 2026, with a further 30 percent increase locked in for the second quarter. Analysts attribute this supply crisis to escalating AI capital expenditures, with hyperscalers expected to spend approximately $650 billion on infrastructure in 2026, representing an 80 percent increase from the previous year’s record.
Memory producers are shifting their focus to high-margin AI products, leading to an undersupply of conventional DRAM. New fabrication capacities are not anticipated to be available until late 2027, and indications are that the global chip wafer shortage could last until 2030. Consequently, larger prepayments by major buyers are influencing supply dynamics, causing longer lead times and higher costs for smaller customers.
The transition from traditional quarterly procurement to multi-year agreements signals a change in the memory market. With major players now securing long-term contracts, analysts predict that the conventional boom-and-bust pricing cycle in the memory sector may evolve toward more structured supply agreements similar to those in the energy market.
