Samsung (SSNLF.US) plans to shift towards signing long-term contracts to alleviate concerns about storage chip shortages.

South Korean storage chip giant Samsung Electronics (SSNLF.US) is considering switching to signing multi-year storage chip contracts, which will significantly exceed normal levels and may help stabilize supply and alleviate concerns about the shortage of this critical component. Samsung Electronics' Co-CEO, Young Hyun Jun, told shareholders at the annual general meeting that the company is considering extending current quarterly or yearly contracts to up to three to five years. He stated that demand for artificial intelligence (AI) storage chips is expected to continue to surge through 2026. Samsung Electronics' stock price soared by 6.5% on the South Korean stock exchange, rising for the third consecutive trading day and also driving up the stocks of other companies in the group. Samsung C&T Corp. and Samsung Life Insurance Co. each rose by 8.9% and 13%, respectively. Over the past few decades, the storage chip industry has been experiencing a cycle of "boom-crash-boom," but now, the AI spending boom is causing the industry to enter a new rhythm. Industry executives suggest that AI has broken the traditional cyclical pattern structurally and there are no signs of prices decreasing. SK Hynix, another South Korean storage chip giant, has also mentioned that the entire industry is going through structural changes. A spokesperson for the company stated, "Company clients, including large-scale data center operators, are increasingly inclined to sign long-term contracts instead of the more common one-year agreements." Micron Technology, Inc. has also stated that customers are now willing to sign long-term supply agreements to secure memory supply for several years. By 2025, as global AI infrastructure construction reaches an explosion phase, the storage industry will enter a "super cycle." The core logic is that AI servers require storage capacity and bandwidth far beyond ordinary servers, and the industry's capacity is shifting towards high-end storage products (such as HBM), squeezing the production capacity of traditional storage products, leading to a wave of price increases in the entire storage industry. Currently, AI infrastructure construction is still accelerating, with major technology companies expected to spend a staggering $650 billion in 2026, an increase of about 80% from last year's record level. According to industry research, data centers accounted for about 50% of global DRAM demand in 2025, compared to only 32% five years ago. This ratio is expected to continue to rise. By 2030, AI servers are expected to account for over 60% of global storage demand. The increasing demand for AI is causing a historic shortage of storage chips. Meeting the exponentially growing demand for chips will be costly and may even be impossible to achieve. While companies like Micron Technology, Inc., SK Hynix, and Samsung Electronics are expanding their production capacity through new construction or upgrading of manufacturing facilities and advanced packaging plants, such projects often require several years and billions of dollars in investments to yield significant output. Currently, companies related to data center construction are still ensuring they have the necessary storage chips to continue their expansion. Their revenue and profits are growing in tandem with storage chip manufacturers benefiting from the surge in demand. However, for consumer electronics companies, this supply shortage may mean more expensive products, lower profit margins, and slower product upgrades. Executives from companies like Apple Inc., Alphabet Inc. Class C, and Tesla, Inc. have been discussing the impact of the storage chip shortage on profitability and even the timeline for AI advancements. The head of Google DeepMind, Demis Hassabis, referred to it as a "bottleneck" in the industry. At Tesla, Inc.'s earnings call in late January, CEO Elon Musk even suggested the idea of producing their own storage chips. SK Group Chairman Chey Tae-won stated on Monday that with AI-driven demand consistently exceeding supply, the global shortage of storage chips may continue until 2030. Chey Tae-won explained the reason for the storage chip shortage, saying, "AI actually requires a lot of HBM, and once we start making HBM... we have to consume a lot of storage chips." He added, "So, we need some time to increase more storage chip production capacity, at least four to five years. The current shortage may last until 2030, and we expect the shortage ratio of storage chips to exceed 20%." He also mentioned that SK Hynix will work on developing a strategy to stabilize DRAM prices, saying, "So, I can't announce directly here, but I guess our CEO will announce a new plan on stabilizing DRAM prices."