Why is Samsung, coming off a record quarter, locking 60 to 70 percent of its memory capacity into five-year deals?

Samsung Electronics plans to commit 60 to 70 percent of its memory capacity to multi-year supply contracts. The figure came out of the Q&A on its second-quarter earnings call, and the results release published the same day does not mention the plan at all.

Samsung Electronics Announces Second Quarter 2026 Results (Samsung Newsroom, 2026-07-30)

출처: news.samsung.com

That release covers revenue, profit and the view that the market will stay undersupplied, but it says nothing about long-term agreements. The only place the number was said out loud was the call that followed. Second-quarter revenue was 171.5 trillion won and operating profit was 89.5 trillion won. Almost all of that profit came from the Device Solutions division, which runs the chip business.

What a multi-year contract actually is

An LTA locks in volumes, and often prices, for years ahead. When prices rise, the supplier takes less than it could have. When prices fall, the customer pays more than it would have. It works less like a sale and more like insurance both sides buy from each other. Here are the terms Samsung described. The base term is five years, with a further year added through negotiation each year. The contracts carry advance payments, money handed over before any goods ship. The company said it has already received about a quarter of the advance payments it agreed to. Five large global data center customers have signed. Five more large customers are in final negotiations.

Samsung to Supply 70% of Memory Under Long-Term Contracts (Seoul Economic Daily English, 2026-07-30)

출처: en.sedaily.com

That report names the five signed customers as Amazon Web Services, Microsoft, Google Cloud, Meta and Oracle. The company did not name customers on the call, so this part comes from press reporting rather than disclosure.

Why lock it in now

The reason the company gave is time, not price. From breaking ground on a new fab to wafers coming out takes more than three and a half years. So even with higher capex across the industry, supply cannot expand meaningfully before 2028. The company expects the 2027 shortage to be worse than this year's. NAND is inside the contracts too. NAND is the storage-side memory that keeps its contents with the power off, and server SSDs for AI machines are expected to make up more than 60 percent of Samsung's NAND revenue, up more than 20 percentage points from a year earlier.

Who gets the remaining 30 to 40 percent

This is why the number missing from the release matters. If 60 to 70 percent of capacity leaves through contracts, buyers outside those contracts are bidding for the other 30 to 40 percent. The company said it set the ceiling there to keep enough flexibility for customers without agreements. Smaller phone and PC makers, plus the spot market, compete for that slice.

So what tells us which it was

It comes down to one question. Is locking 60 to 70 percent of capacity into five-year deals a seawall or a ceiling? If memory prices keep climbing, it is a ceiling. Committed volume does not collect the higher price. If prices turn down, it is a seawall. Committed volume still ships when the spot bid disappears. Having the advance payments already in hand looks like preparation for the second case. Memory has been an industry where everyone expands when prices rise, and that expansion returns as oversupply a few years later. If these contracts are an attempt to break that loop, the test is how much less profit falls in the next downturn.