--- title: "1-Year Contracts Are a Thing of the Past: Samsung and SK Hynix to Sell Only via 3-5 Year Long-Term Orders" type: "News" locale: "en" url: "https://longbridge.com/en/news/282130148.md" description: "Samsung Electronics and SK Hynix are spearheading a business model revolution in the memory industry—completely abandoning years of quarterly short-term contracts in favor of 3-to-5-year Long-Term Agreements (LTAs). Tech giants like Microsoft and Google will be integrated into a long-term framework that locks in prices and volumes, potentially breaking the \"curse\" of cyclical memory price collapses" datetime: "2026-04-09T03:55:42.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/282130148.md) - [en](https://longbridge.com/en/news/282130148.md) - [zh-HK](https://longbridge.com/zh-HK/news/282130148.md) --- # 1-Year Contracts Are a Thing of the Past: Samsung and SK Hynix to Sell Only via 3-5 Year Long-Term Orders Samsung Electronics and SK Hynix have decided to abandon the annual and even quarterly short-term supply contract model used for many years, instead requiring major global tech clients to sign 3-to-5-year Long-Term Agreements (LTAs). This shift marks a fundamental restructuring of the memory industry's business logic. According to South Korean media Aju Business Daily (ajunews) on Thursday, **starting this year, Samsung will fully apply a minimum 3-year LTA framework to new contracts with major clients; key customers such as Microsoft and Google are expected to secure stable three-year memory supplies under this system.** Meanwhile, SK Hynix is in negotiations with Google for a long-term supply contract for commodity DRAM lasting up to 5 years, with talks expected to conclude within the first half of the year. Jun Young-hyun, Vice Chairman and Head of the Device Solutions (DS) Division at Samsung Electronics, explicitly stated at the regular shareholders' meeting on the 18th of last month that the company is pushing to convert supply contracts with customers from the current annual and quarterly models to multi-year contracts of 3 to 5 years. For investors, this transformation means that the performance of both companies will gain stronger downside support. Even if market demand plummets, locked-in prices and shipment volumes will provide a buffer for revenue, potentially systematically alleviating the "cyclical curse" that has long plagued the memory industry. ## Samsung Pushes Comprehensive LTA Transition, SK Hynix Negotiates Five-Year Contract with Google According to industry sources, Samsung Electronics has established a policy: starting this year, new contracts signed with major customers will fully adopt an LTA mechanism of at least 3 years. This stands in sharp contrast to previous practices—as recently as last year, Samsung still accepted ultra-short-term contracts on a quarterly basis. Jun Young-hyun's remarks at the shareholders' meeting provide top-level endorsement for this policy shift. He clearly pointed out that the company is actively promoting the upgrade of supply contracts from "annual/quarterly units" to "3-to-5-year multi-year contracts." Under this framework, core clients like Microsoft and Google are expected to receive stable supplies of memory products on a three-year cycle. SK Hynix's moves are even more aggressive. It is reported that the company is advancing a long-term supply contract for commodity DRAM with Google for a duration of up to 5 years. Previously, the market generally expected a 3-year term, **but SK Hynix internally believes that "3 years is still too short" and has therefore extended the target duration to 5 years.** The bargaining chip lies in SK Hynix's current position as the primary supplier for Google's fifth-generation High Bandwidth Memory (HBM3E). The two parties are discussing a plan to exchange a commitment for next-generation HBM supply for a two-year extension of the contract term. Negotiations originally slated for completion within the year have been moved up to conclude in the first half. ## Bidding Farewell to the "Cyclical Curse": LTAs Reshape the Memory Industry's Profit Structure **In the past, the memory market was based on "commodity" characteristics—mass-producing standard DRAM for PCs and smartphones and delivering them based on quarterly fixed prices or daily fluctuating spot prices.** This model meant that even slight fluctuations in demand could trigger price collapses, causing companies to record losses of trillions of won, leaving suppliers in a passive and pressured position for long periods. The core value of the LTA system lies in locking in risk exposure. By pre-determining shipment volumes and prices for 3 to 5 years, companies can maintain performance through established contracts even if economic downturns cause demand to shrink sharply, thereby achieving "downside rigidity" in profits. On the capital expenditure front, LTAs also bring efficiency improvements. Since shipment volumes are confirmed, companies can abandon blind capacity expansion races and instead implement precisely calculated equipment investments. The industry generally believes that as the proportion of long-term contracts rises, the profit margins of memory companies will remain stable at higher levels. For products like HBM, which involve high process complexity and strong customization needs, the "order first, then produce" model is particularly crucial. This not only eliminates inventory pressure at the source but also improves mass production efficiency, creating a customized supply system similar to that of foundries. **An industry insider stated, "The era when memory companies worried about price drops and warehouse inventory pile-ups is over. Samsung Electronics and SK Hynix have now transcended the role of simple memory suppliers, rising to become strategic infrastructure partners for global Big Tech companies."** ### Related Stocks - [FTXL.US](https://longbridge.com/en/quote/FTXL.US.md) - [SMSN.UK](https://longbridge.com/en/quote/SMSN.UK.md) - [SSNGY.US](https://longbridge.com/en/quote/SSNGY.US.md) - [SOXX.US](https://longbridge.com/en/quote/SOXX.US.md) - [SMH.UK](https://longbridge.com/en/quote/SMH.UK.md) - [SMH.US](https://longbridge.com/en/quote/SMH.US.md) - [07747.HK](https://longbridge.com/en/quote/07747.HK.md) - [XSD.US](https://longbridge.com/en/quote/XSD.US.md) - [07709.HK](https://longbridge.com/en/quote/07709.HK.md) - [09747.HK](https://longbridge.com/en/quote/09747.HK.md) - [DRAM.US](https://longbridge.com/en/quote/DRAM.US.md) - [SOXL.US](https://longbridge.com/en/quote/SOXL.US.md) - [MSFT.US](https://longbridge.com/en/quote/MSFT.US.md) ## Related News & Research - [Samsung Electronics eyes investment in chip packaging plant in Vietnam](https://longbridge.com/en/news/282198929.md) - [Samsung to discontinue Messages app by July 2026: What it means for users](https://longbridge.com/en/news/281736361.md) - [Key facts: Samsung Forecasts Record Q1 Profit; Launches Windows Browser](https://longbridge.com/en/news/281744318.md) - [Samsung Electronics (SSNLF) Set to Shatter All-Time Quarterly Profit Amid AI Chip Boom](https://longbridge.com/en/news/281651258.md) - [PREVIEW-Samsung Elec likely to report stupendous surge in quarterly profit to record level](https://longbridge.com/en/news/281616659.md)