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Micron inks long-term supply agreements worth $100 billion — says it has no idea when RAM crisis will end
In a world where memory is no longer a commodity but a strategically valuable asset, customers are eager to sign long-term supply agreements (LTAs) with their suppliers to ensure a steady supply of 3D NAND and/or DRAM. Micron this week announced that it had signed 16 strategic customer agreements (SCAs), 14 of which are worth around $100 billion. Furthermore, the company expects to receive cash deposits and other commitments worth $22 billion, but has warned there is no foreseeable end in sight to the RAM crisis driving up PC component prices.
“14 of the 16 SCAs that we have signed have a cumulative revenue at minimum price per our contracts of approximately $100 billion over the remaining agreement term,” a statement by Micron reads. “Under the SCAs we have signed so far, we project to receive cash deposits and related financial commitments of $22 billion.”
Based on Micron’s claims, the company has about $100 billion of guaranteed baseline revenue already locked in under 14 of those 16 strategic customer agreements, assuming customers only buy the minimum committed volumes and only pay the minimum contract price. In reality, Micron can earn more if customers buy higher volumes or pay higher prices. Furthermore, Micron expects customers who signed these long-term SCAs to put up real money up front — or make equivalent binding financial commitments — as part of reserving future memory supply.
Micron claims it has signed strategic customer agreements with four 'very large customers' and three 'medium-sized customers,' which means that the contracts were inked with clients that previously did not commit to LTAs. The contracts are signed with a five-year term (except the automotive LTAs, which have a term of three years), from calendar 2026 to calendar 2030.
Micron claims that memory supply will be insufficient in 2027 and may improve gradually only in 2028. To that end, it is not surprising that its clients are willing to sign LTAs for 3D NAND and DRAM to ensure that they have enough memory for their products.
"With respect to supply, our customers are recognizing that supply shortages in memory and storage will take considerable time to improve," said Sanjay Mehrotra, chief executive of Micron, in prepared remarks. "Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand."
Normally, Micron and other memory producers inked LTAs with select clients only (read: with Apple, Nvidia). 16 LTAs is a lot for this kind of arrangement, and this looks like a business model shift for the company. It is noteworthy that the 16 signed contracts represent roughly 20% of Micron's DRAM volume and 33% of the company's NAND volume over the period through 2030. That said, Micron may sign more LTAs with more companies.
Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.
You can believe them if you want, but these predictions, agreements, and prices will fall apart if the bubble pops. So it's time to decide who's right and when before making a purchase, unless you're content to wait out obscene pricing indefinitely.
You can believe them if you want, but these predictions, agreements, and prices will fall apart if the bubble pops.
Yeah, the contracts will have exit penalties. But, if the spot price falls by enough, I think their customers will just pay the exit penalty, buy on the spot market, and still end up saving money.
The other thing that could happen is if some of the customers holding these agreements go bankrupt. Then, if the bankruptcy court can't sell on those agreements to someone else (probably not, since it'll probably mean the bubble has popped), then Micron will have collected only a fraction of what they were banking on.
So, these agreements provide a measure of certainty, but they are by no mean guarantees.
If this is not evidence of price fixing then what is. They are inking these contracts to make sure they are getting the highest possible value in their product in case of a collapse. This is just egregious and the big 3 need to be held accountable for their misdeeds and stop lying to the public about their corruption and control of a single market.
If this is not evidence of price fixing then what is.
Price-fixing is establishing agreements between competitors, so like Micron vs. SK Hynix vs. Samsung. Agreements between suppliers and customers is fundamentally different.
Dntknwitall said:
They are inking these contracts to make sure they are getting the highest possible value in their product in case of a collapse.
Long-term supply agreements are nothing new. They serve a practical purpose of enabling the supplier to make investments in their production lines, without the risk that they'll face under-capacity that would make them highly unprofitable.
Institutional memory is long, in this business. All of the memory makers keenly recall the 2022-2023 market collapse, when they had to sell inventory below their production costs. You can look it up: they were all losing money.
