Roughly 80% of Samsung Electronics' memory chip output for next year has already been secured in advance through long-term supply agreements, and the scramble among tech giants for the remaining capacity underscores just how heated the AI infrastructure arms race has become.

According to a report earlier this week by The Korea Economic Daily, global technology heavyweights including Nvidia, Google and Microsoft have already signed chip supply agreements with Samsung spanning more than five years, while companies that have yet to finalize deals are quietly jockeying for the remaining roughly 20% of capacity.

On its second-quarter earnings call, Samsung Electronics said that "almost all major customers are applying for long-term agreements," and admitted it is "difficult to respond to all demand."

The Battle for Memory Capacity: 80% Already Spoken For

This trend has spread from memory chips across the entire AI infrastructure supply chain, encompassing multi-layer ceramic capacitors (MLCC), flip-chip ball grid array substrates (FC-BGA), transformers, power equipment and cooling systems. Bargaining power in the market is shifting rapidly toward suppliers, with prepayments of 20% to 25% and mandatory purchase clauses becoming increasingly common — though analysts warn that if the semiconductor market turns, long-term agreements could also become a risk exposure for suppliers.

The report said that, according to industry sources, about 80% of Samsung Electronics' memory chip output next year, including high-bandwidth memory (HBM), has already been locked in with buyers through long-term supply agreements. This means technology companies that have not yet signed with Samsung can only compete for the remaining roughly 20% of capacity.

Samsung is not alone. SK Hynix has completed long-term agreements with major customers; Micron Technology's number of strategic customer agreements rose from 16 in the second quarter to 26 in the third quarter; and NAND flash maker SanDisk has also signed long-term agreements with eight customers, including several large technology companies.

This shift has a historical backdrop. Quarterly contracts or spot-price transactions have long been the norm in the semiconductor industry, making it hard for chipmakers to predict future pricing and demand trends. As global technology companies sharply increased investment in AI data centers this year, chip shortages emerged, and securing a stable memory supply became a top strategic priority for tech giants, accelerating the adoption of the long-term agreement model.

The Long-Term Agreement Map Expands: From Chips to the Full AI Infrastructure Chain

The wave of long-term agreements has broken past the boundaries of memory chips and is spreading across the entire AI infrastructure supply chain.

Samsung Electro-Mechanics is about to sign a long-term MLCC supply agreement worth 700 billion won (about $507 million) with Delta Electronics, which would be its seventh such agreement completed this year. Samsung Electro-Mechanics' cumulative order volume this year is expected to reach 4.6 trillion won (about $3.33 billion). LG Innotek is also in long-term negotiations over an FC-BGA supply agreement.

Similar dynamics are emerging in the power and cooling infrastructure sectors. LS Cable & System has signed a five-year busway long-term agreement with U.S. technology companies including Meta and Google; HD Hyundai Electric is advancing long-term negotiations for data center transformers; and LG Electronics has signed a chiller supply contract worth 5 trillion won (about $36.2 billion) with Air, a U.S. AI data center infrastructure company.

An industry insider said that given the expected continued shortage of AI-related components, tech giants are willing to accept unfavorable terms in order to lock in supply.

Bargaining Power Changes Hands: Suppliers Reap Prepayments and Mandatory Purchase Clauses

Suppliers hold clear leverage in this wave of long-term agreements. Because manufacturers' capacity expansion cannot keep pace with demand growth, the supply-demand imbalance continues to widen, and market bargaining power has shifted markedly toward suppliers.

In the memory sector, five years has become the standard base term for long-term agreements, accompanied by a one-year extension clause that rolls over annually. To strengthen the binding force of contracts, high prepayments of 20% to 25% have become an industry norm, paired with strict mandatory purchase clauses — even if customers fail to take delivery, they must still pay as agreed. Suppliers sometimes use these prepayments as a source of funding for large-scale wafer fab construction.

This model reflects a deep alignment of interests between tech giants and component manufacturers: the former seek a stable supply chain, while the latter use it to hedge capital expenditure risk.

Potential Risks: A Cooling AI Boom Could Make Long-Term Agreements a Double-Edged Sword

Although long-term agreements give suppliers greater revenue visibility, the risks have not disappeared.

Choi Woo-young, a professor in the Department of Electrical and Computer Engineering at Seoul National University, noted that "if the memory market falls into a downturn and customers demand renegotiation, suppliers will have no choice but to loosen existing terms."

If the semiconductor market suffers a sharp downturn, customers may choose to default and bear penalties, in which case component manufacturers that relied on long-term agreements to expand capacity aggressively would face severe shocks. While long-term agreements improve supply chain stability, they also deeply tie suppliers' fate to the sustainability of AI demand — this is both a current competitive advantage and a potential source of systemic risk.