China Storage Chip Giant Signs 10-Year Long-Term Contracts

“If clients start demanding 10-year supply contracts, how can you still be pessimistic about storage chips?” This is the judgment made by Daishin Securities in its latest report. Under the background of continuous acceleration of AI data center construction, the storage industry is experiencing a rare phenomenon: more and more major clients are no longer satisfied with quarterly or annual purchases, but instead are locking in HBM and DRAM supply capacity for the next five years or even ten years in advance. According to Daishin Securities, Samsung has stated that almost all major clients are actively seeking to sign long-term supply contracts, not for lower prices, but because they are worried that they will not be able to obtain sufficient storage capacity in the future. For AI infrastructure operators, GPUs can be expanded, and servers can be purchased, but if HBM and other key storage supplies are insufficient, the deployment rhythm of the entire data center may be affected. Currently, Samsung has completed long-term supply contracts with 5 major data center clients and is about to finalize deals with another 5 large AI clients. What's more noteworthy is that about 70% of Samsung's storage chip production capacity has been included in long-term contracts, with supply cycles extending to 2031. This means that a large part of advanced storage capacity in the next few years has been locked in by major clients in advance. Unlike the "intentive bookings" commonly seen in the industry during periods of market prosperity, these contracts are not easily cancellable and contain core clauses such as advance payments, minimum purchase commitments, and price floors. These clauses not only ensure stable supply for clients but also help Samsung reduce the risk of market price fluctuations. The price floor means that even if the market enters a downward cycle, the contract price will be protected to some extent, while the purchase commitment requires clients to fulfill their contracted purchase quantities. The report also revealed that Samsung has received advance payments of about one-quarter of the total value of these long-term contracts, further increasing the certainty of the orders and reflecting the fierce competition among clients for future capacity. These contracts are designed with strategic implications. Most contracts have a five-year initial term and adopt an annual renewal mechanism, allowing Samsung to continuously update its demand forecasts for the next five years and extend its production planning accordingly. Daishin Securities stated that Samsung has already begun discussing supply scales with some clients for 2031 and that some AI clients have even proposed signing the longest 10-year supply contracts. For an industry with extremely strong cyclicality like storage, this is a rare signal. Companies almost never lock in standard semiconductor products for ten years in advance, unless they believe that future supply capacity itself will become a strategic resource. As AI model parameters continue to grow and data centers expand, HBM and high-performance DRAM are gradually transforming from ordinary components to key infrastructure that determines the speed of algorithm construction. In addition to demand, Samsung's technological progress has also made these long-term orders more meaningful. Daishin Securities expects Samsung to regain its largest share of the HBM market next year, mainly due to broader client coverage, rising HBM prices, and the earlier-than-expected improvement of 1c DRAM yields to about 80%. The improvement in yield rates means that Samsung can produce more usable DRAM chips on the same wafer manufacturing capacity, not only increasing production utilization rates but also effectively reducing unit production costs and improving overall profit margins. For HBM products that heavily rely on advanced DRAM stacking, the improvement in underlying DRAM yields directly determines the final product's supply capacity and profit levels. Daishin Securities further expects Samsung to strengthen its capital return policy from 2027 to 2029, including increasing dividends and potentially implementing stock buybacks. When top AI clients around the world start discussing storage supplies for 2031 and actively propose signing the longest 10-year purchase contracts, the focus of this competition may have shifted from who has the most advanced HBM technology to who can provide stable and predictable large-scale storage capacity for the next decade.