Cloud giants' attitude shift, mandatory long-term storage procurement contracts may reshape industry cycles.
Wall Street Journal mentioned that, according to EBN News, Samsung Electronics is currently negotiating long-term supply agreements with Google and Microsoft, discussing a prepayment arrangement exceeding $10 billion. If the procurement volume does not meet the agreed scale, the shortfall will be deducted from the prepayment.
Analysts point out that if long-term agreements are realized, storage manufacturers will gain over three years of demand visibility, which will help curb price volatility, support stable profit margins, and promote more certain capital expenditure expansion.
Meanwhile, Micron and SK Group are also advancing similar arrangements. Micron disclosed its first five-year strategic customer agreement in its Q2 fiscal 2026 earnings report. The chairman of SK Group hinted in an interview with Bloomberg that SK Hynix is about to launch specific measures to stabilize storage prices, but did not disclose details.
Behind this wave of long-term agreements lies a deeper industrial logic: storage chips are transitioning from standardized commodities to highly customized products. With the advancement of next-generation memory products like HBM4, the proportion of customized HBM will significantly increase, and customers increasingly need to collaborate deeply with suppliers from the design stage.
This collaborative model naturally requires longer contract periods and stronger supply-demand binding, further driving structural growth in long-term agreement demand. Analysts point out that if multiple major suppliers successively lock in long-term orders, the cyclical pattern historically characterized by &#34;supply-demand misalignment and price shocks&#34; in the storage industry will face structural reshaping.
<h2>From &#34;refusing long-term contracts&#34; to &#34;actively binding,&#34; cloud giants' attitude has turned sharply</h2>
Just a few months ago, the situation was entirely different.
According to South Korea's &#34;Korea Economic Daily,&#34; in January of this year, Samsung and SK Hynix attempted to raise server DRAM prices by 60% to 70% in the first quarter compared to the previous quarter, quoting major customers like Microsoft and Google, but both cloud companies refused to sign two to three-year long-term contracts, insisting on maintaining a short-term contract model based on quarterly procurement.
However, as the expansion of AI data centers continues to accelerate, storage chips, as a key bottleneck, have become increasingly prominent, and cloud companies' priority for supply assurance has surpassed considerations for price flexibility.
According to EBN News, the industry expects storage suppliers to complete long-term supply agreements with major technology companies within the first half of this year.
Samsung's co-CEO Jun Young-hyun stated at the shareholders' meeting on March 18 that the company is considering extending contract periods from the common quarterly or annual basis to three to five years. He also noted that demand for AI storage chips is expected to continue growing until 2026.
Amid the overall decline of U.S. stocks this week, memory stocks still performed well.
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<h2>Long-term Agreement Structure: Spot Price Linkage, Prepayment Enforcement</h2>
According to EBN News, the most likely contract structure currently under negotiation is to lock in procurement volumes over multiple years while linking pricing to spot market levels.
If the spot price deviates from the preset range, the contract price will adjust accordingly. This design ensures income stability for suppliers while retaining some price flexibility for buyers.
What truly distinguishes this round of long-term agreements from historical precedents is the introduction of a prepayment mechanism.
EBN News specifically pointed out that similar long-term agreements were reached around 2019, but at that time, the contracts lacked enforceability, allowing customers to unilaterally cancel orders. The agreements in this negotiation ensure execution through high prepayments; if customers fail to procure as agreed, the prepayments will be correspondingly deducted, effectively constituting a breach cost.
This mechanism has significant economic implications for Samsung. Reports indicate that the scale of prepayments between Samsung and Microsoft exceeds $10 billion. If the agreement is finalized, it will provide Samsung with visible cash flow over the next few years, directly supporting its capital expenditure decisions.
<h2>Long-term Agreements Reshape Supply and Demand Logic, Storage Cycles May Become Smoother</h2>
The cyclical fluctuations in the storage industry stem from systematic misalignments in supply and demand. Manufacturers expand production during high prosperity periods, leading to overcapacity when demand declines, causing prices to collapse. This pattern has repeated itself over the past several decades.
EBN News analyzes that if long-term supply agreements are widely implemented, manufacturers will gain over three years of demand visibility, providing a stronger basis and confidence when making investment decisions. This will help curb significant price declines and support more stable profit margins.
Micron's actions provide a concrete reference. The company has announced a capital expenditure plan exceeding $25 billion for the fiscal year 2026, nearly doubling from the previous year's $13.8 billion, with part of the increased expenditure confidence attributed to the demand visibility brought by long-term agreements.
However, according to Global Economic citing market analysts, the promotion of long-term agreements also means that the buffering effect of storage prices during downturn cycles will be weakened. In the past, significant price declines during market downturns helped reduce costs for consumers, but this adjustment mechanism may be diminished in the future.
According to the Chosun Ilbo, Samsung is assessing the risk of a reversal in the global storage market potentially occurring as early as 2028 and is tightening operational discipline to guard against a new round of overcapacity cycles.

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The attitude of cloud vendors has shifted from "refusing long-term contracts" to "actively binding," driven by the accelerated expansion of AI data centers and the increased priority of supply assurance. The new agreement introduces a prepayment default mechanism and links pricing to the spot market. If long-term contracts are widely implemented, the historical cyclical pattern of "supply-demand misalignment and price shocks" in the storage industry may face structural reshaping, but the buffering effect on the consumer end during the price decline period will also weaken

- Samsung is negotiating long-term supply agreements with Google and Microsoft for over $10 billion in prepayment arrangements, aimed at stabilizing demand visibility for more than three years.  
- This transition from short-term contracts to long-term agreements reflects cloud giants prioritizing supply assurance over price flexibility due to growing AI data center demands.  
- Analysts believe that if these agreements are widely implemented, the storage industry's cyclical volatility may be structurally reshaped, potentially leading to more stable prices and profit margins.

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Microsoft and other major cloud companies begin signing "mandatory long-term contracts for storage procurement," which will reshape the "storage cycle."