SK Hynix (HXSCL) is removing price caps from its Long-Term Agreements, or LTAs, recently signed with its clients, Green Economy News reported, citing industry sources.
Unlike the existing practice of setting price caps for long-term contracts for memory, this structure allows the increase in spot prices to be fully reflected in the contract price if market prices surge due to supply shortages, the report added.
SK Hynix did not immediately respond to Seeking Alpha's request for comment.
Analysts suggest that suppliers' negotiating power is being significantly strengthened as the company, along with rival Samsung Electronics (SSNLF), extends contract periods, the report noted.
Usually, memory chip makers have reduced price volatility by offering price caps to clients in exchange for securing long-term orders. However, SK Hynix has effectively restructured its contracts to maximize profitability during periods of rising prices. The industry views SK Hynix as the only major memory maker currently that does not apply price caps, according to the report.
Long-term contract periods are also extending. As investment in AI servers increases and demand for high-performance memory, including High Bandwidth Memory, or HBM, grows, SK Hynix and Samsung are reportedly extending their long-term supply contracts from the existing one-year level to three to five years. Customers are also showing signs of securing memory supplies in the mid-to-long term, and suppliers appear to be gaining bargaining power, the report added.
American rival Micron Technology (MU) chose a different strategy. In a Strategic Customer Agreement, or SCA, released last month, Micron set the price cap for its existing products at the market price of the second quarter of 2026, the report noted.
The price floor was designed to guarantee profitability higher than in any past business cycle, to make sure that a certain level of profit can be secured even if market conditions deteriorate. The company aimed for both stability and profitability by leaving room for further price increases for the new products, the report noted.
An industry insider noted that as long as investment in AI servers continues to expand, it will be difficult for memory suppliers' bargaining power to weaken easily, adding that even in long-term supply contracts, a trend is emerging where the price structure is shifting in favor of suppliers, going beyond simply securing volume.
On Thursday, SK Hynix said it would invest 100T won (about $64.38B) to build memory chip and packaging plants as part of a South Korean investment drive aimed at semiconductors and AI. Meanwhile, peer Samsung announced plans to invest a combined 140T won (about $90B).
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