Microsoft and Google are negotiating three-year DRAM supply agreements with SK Hynix that include price floor guarantees and upfront deposits ranging from 10 to 30 percent of the total contract value. These agreements mark a significant change in the procurement strategy of major technology companies as they seek to treat DRAM as a strategic reserve in light of a global shortage exacerbated by rising AI infrastructure spending.
SK Hynix and Microsoft are finalizing a long-term supply contract for DDR5 memory beginning in 2026, valued at tens of trillions of Korean won. Key provisions being discussed include a price floor to mitigate against declining DRAM prices and requirements for prepayments. In parallel, SK Hynix is also negotiating contracts with Google for high-bandwidth memory and general server DRAM.
Samsung Electronics is reportedly seeking similar deals, reportedly in discussions with both Microsoft and Google involving potential prepayments exceeding $10 billion from Microsoft. Micron Technology has already made strides in this direction, signing its first five-year Strategic Customer Agreement disclosed during its fiscal second-quarter 2026 earnings call.
This shift to long-term contracts contrasts with previous practices where major manufacturers like Samsung and SK Hynix sought to capitalize on rising prices by rejecting multi-year arrangements. The persistent shortage of DRAM has shifted the market dynamics, with prices having surged by 90 to 95 percent quarter-over-quarter in Q1 2026 and another 30 percent increase already secured for Q2. According to industry analysts, the escalating demand for AI infrastructure, projected to reach approximately $650 billion in spending for 2026—an 80 percent increase from the previous year—is a key driver of this pricing trend.
Memory manufacturers are increasingly focusing on high-margin AI products, leaving conventional DRAM in structurally undersupplied conditions. New fabrication capacity is not anticipated to become available until late 2027, with experts warning of a persistent global chip wafer shortage that may last through 2030. This transition from quarterly procurement to multi-year agreements may negatively impact smaller customers, who could experience longer lead times and higher costs as larger buyers secure supply through substantial upfront payments.
