Up-front payment and 3-5 year volume commitment for memory buyers

A report in EBN News says a likely model would fix volumes over a multi-year period while linking pricing to spot market levels. Contract prices would adjust if spot prices move beyond a predefined range.

Customers would make up-front pre-payments with the prepayments offset if agreed volumes are not purchased within three to five years.

It is said that  Samsung is discussing a $10 billion pre-payment deal with Microsoft while Micron referred to a five-year strategic customer agreement (SCA) in its Q2 earnings announcements.

The up-front payments are to ensure enforceability which was not possible under previous supply deals.

Up-front payments may encourage the memory companies to expand capacity though Micron has already announced plans to invest more than $25 billion in fiscal 2026, nearly double the $13.8 billion it spent last year.

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