Samsung's Tyrannical Grip on DRAM and NAND Memory: Non-Cancellable Contracts and Fixed Prices for 5 Years

The memory industry, characterized by supply tension and soaring demand driven by AI, has seen manufacturers regain control. However, Samsung is going further, directly redefining how DRAM and NAND are purchased at scale through its contracts and pricing for partners and customers.

Samsung's strategy centers on long-term contracts, ranging from 3 to 5 years, under strict NCNR (Non-Cancellable and Non-Returnable) conditions. This means customers cannot cancel orders or return products once the agreement is signed, eliminating any flexibility in the face of demand changes or market fluctuations.

Samsung Begins to Act as a Tyrant with DRAM and NAND Memory Towards its Customers

The company is adopting a stance that many consider tyrannical, especially by imposing NCNR conditions amidst a crisis affecting the sector, businesses, and users.

This new model fixes volume and price from the contract's inception, with revisions controlled exclusively by the manufacturer. This strips clients and partners of their negotiating power, breaking with decades of cyclical dynamics in the memory market.

While original equipment manufacturers (OEMs) previously adjusted purchases based on market cycles, managed inventory, and leveraged price drops to improve margins, they now face a situation with no room for maneuver—a "take it or leave it" scenario with no possibility of complaint. Given and explained the problem, it does not take much to understand what is to come, but even so, let's go with it.

Manufacturer Decline Accelerates, Sales Will Stagnate, Users Will See Increasingly Higher Prices

With this strategy, Samsung transfers all risk to the buyer. If prices rise, the customer must absorb the increase, but if they fall, they cannot benefit from the reduction or decrease their exposure. Memory purchasing becomes a long-term financial obligation, more akin to an industrial agreement than a market transaction.

Essentially, Samsung secures its revenue by capitalizing on businesses' dependence on its memory. This stance pressures competitors to adopt similar models if they wish to maintain their profitability, pushing market tension to the limit and eliminating any debate over terms.

The PC and laptop market will suffer a direct impact. Manufacturers like HP, Dell, or Lenovo will lose flexibility to adjust configurations, costs, and final prices, potentially leading to more expensive devices or reduced ability to adapt to demand changes, especially in mid-range and low-end segments where margins are more sensitive to memory costs. What will happen in our sector?

This will lead to a smaller product offering and less diversification. Manufacturers will focus on profitable models, producing them according to demand and with price increases. Although the AI sector, with its abundant funding, might initially be less affected, this situation will also not be well-received.

Regardless, Samsung has locked down its contracts and prices, solidifying its control over DRAM and NAND Flash memory alongside SK Hynix and Micron, and is pressuring them to follow suit if they wish to maintain their profitability. Did you think the situation couldn't get worse? Grave error. It can always get worse, and it is. The good news is that this acceleration might also hasten the end of this madness, which will have a next chapter, there always is.