Samsung Considers Long-Term Contracts to Mitigate Memory Chip Shortage Concerns

Samsung Electronics Co. Considers Long-Term Contracts for Memory Chips

Samsung Electronics Co. is exploring a shift towards multi-year contracts for memory chips, a significant departure from the typical quarterly or annual agreements. This move is aimed at stabilizing supply and addressing concerns about a shortage of essential components.

The company's co-CEO, Jun Young-hyun, revealed the consideration at the company's annual general meeting. The contracts could be extended to as long as three to five years, with demand for AI memory chips expected to continue surging in 2026.

The move has led to a surge in Samsung shares, rising as much as 6.5% on the Korea Exchange. Other group stocks, including Samsung C&T Corp. and Samsung Life Insurance Co., also saw significant gains, rising as much as 8.9% and 13%, respectively.

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The global supply of memory chips is dominated by Samsung, SK Hynix Inc., and Micron Technology Inc.. The three companies have shifted production towards specialized memory for use in Nvidia Corp.'s in-demand AI accelerators, leading to a shortfall in conventional storage output.

This deficit is impacting profits, derailing corporate plans, and driving up prices for products such as laptops, smartphones, cars, and data centers. The shortage is expected to worsen before it improves, with SK Hynix preparing to outline measures to stabilize prices.

SK Group Chairman Chey Tae-won expects the global shortage to persist for another four to five years due to endemic constraints in semiconductor production.