The leveraged ETF tracking SK hynix (HKG: 07709) surged more than 7% in trading. At the time of writing, the share price had increased by 7.16% to HK$117.45, with a turnover of HK$19.134 billion.

Key development behind the movement

Market reports, citing informed sources, indicate that SK hynix is moving to eliminate price ceilings recently established within its long-term agreements (LTAs) with clients. According to these sources, this new framework departs from the standard industry practice of setting maximum prices in long-term memory contracts. Instead, it would allow any surge in spot market prices, driven by supply shortages, to be fully reflected in the contract pricing.

Analyst interpretation of the shift

Analysts suggest this move signals a significant enhancement in supplier bargaining power, coinciding with SK hynix and its rival Samsung Electronics extending their contract durations. By removing these price caps, SK hynix is effectively tethering its long-term contracts directly to the volatile spot market. This strategic shift means that if market prices skyrocket due to capacity constraints, SK hynix could seamlessly pass the entire cost premium onto major technology clients like Nvidia, fully converting spot market gains into net profit.