From SanDisk to CXMT, Long-Term Memory Supply Agreements Expand to Second- and Third-Tier Manufacturers

Global shortages of memory chips continue to intensify. Long-Term Agreements (LTAs) have rapidly expanded from the three major manufacturers—Samsung, SK Hynix, and Micron Tech—to include SanDisk and China's CXMT. This supply-demand imbalance is reshaping pricing power and bargaining logic across the entire industry chain.

This week, Wall Street Insights mentioned that Apple, to ensure stable product supply, tested and adopted CXMT products, accepting its "off-the-shelf chip" supply model.

According to Zhongjing Xinwei, citing the Korean media outlet Digital Daily, Apple attempted to negotiate lower DRAM procurement prices with CXMT but was rejected. CXMT insisted that its quotes should be no lower than those of Samsung Electronics and SK Hynix, and potentially even higher.

The reason is simple: Chinese domestic companies such as Huawei and Xiaomi have already locked in CXMT's production capacity through long-term contracts, meaning CXMT does not need to accommodate Apple's stringent conditions.

The market expects price hikes for older iPhone 17 models to begin this week. In the Japanese market, prices for older models have already risen by 8% to 11%, while the price increase for the MacBook Air has reached 20%.

Contract Duration: From "Annual Negotiations" to "Five-Year Minimums"

The standard contract cycle in the memory industry was previously one year, with buyers holding the initiative—pressing for lower prices when supply was ample and locking in volumes when supply was tight. However, this structure is being completely overturned.

According to a comparison table of LTA terms for Samsung, SK Hynix, Micron Tech, and SanDisk by Goldman Sachs, contract durations for these manufacturers are now predominantly five years. Some customers have chosen three-year terms, but even the shortest contracts are three times longer than past industry norms.

Samsung explicitly stated in its recent earnings call that its LTAs are based on a five-year term and include a rolling annual renewal mechanism to ensure the contracts never expire.

Samsung Co-CEO Kim Yong-hyun previously stated: Given the supply and demand uncertainties brought about by the expansion of AI investments, we are shifting from traditional short-term agreements to multi-year contracts of three to five years.

SK Hynix CEO Kwon Oh-jung also pointed out that customer demand for LTAs is continuing to increase. Specific data shows:

• SK Hynix has covered its top ten LTA customers and key clients, with most contracts lasting five years;
• Micron Tech has signed agreements with 16 strategic customers, with most contracts lasting five years, while automotive customers have three-year terms;
• SanDisk's eight LTA customers have a weighted average contract duration of over four years, with the longest being five years.

The simultaneous extension of contract durations by all four manufacturers has systematically compressed the adjustment space for buyers amid changing supply and demand conditions.

Advance Payment Mechanism: From Verbal Commitments to Real Money

In the past, the enforceability of long-term contracts was limited. Buyers could reduce purchase volumes, delay deliveries, or even default after signing contracts without facing substantial penalties.

The most significant structural change in this cycle lies in the comprehensive implementation of the advance payment mechanism:

• Micron Tech expects to receive approximately $22 billion in cash deposits and related financial commitments;
• SanDisk has disclosed over $11 billion in financial guarantees and $16.5 billion in customer default protection;
• Samsung stated that its contracts include large advance payments, of which approximately one-quarter has already been collected.

For a cloud service provider, securing sufficient HBM and DRAM supply before 2028 requires depositing billions of dollars into the manufacturer's accounts beforehand.

This money not only locks in supply but also binds the buyer, making the cost of default extremely high. Goldman Sachs describes the advance payment mechanism as "the most distinctive feature of this LTA cycle compared to previous ones."