"Samsung Electronics Reaches Rerating Turning Point... Chinese Big Tech Firms Request '10-Year DRAM Supply'" [Click e-Stock]

KB Securities said on October 29 that competition between U.S. and Chinese big tech companies is putting upward pressure on memory prices, and analyzed that Samsung Electronics has reached a turning point for a revaluation of its corporate value.

In a report released that day, Kim Dongwon, head of KB Securities' research division, said, "It has been reported that China's four major cloud service providers (CSPs)—Alibaba, Baidu, Tencent and ByteDance—have asked major memory makers, including Samsung Electronics, to sign ultra-long-term supply contracts for server DDR5 and LPDDR5X lasting 10 years through 2035." He added, "This is because the technological capabilities and mass-production stability of China's domestic supplier Changxin Memory Technologies (CXMT) still lag significantly behind."

Kim said, "Chinese CSPs are estimated to account for only about 7-8% of Samsung Electronics' total DRAM revenue," adding, "If long-term supply contracts are signed in the future, the company's potential for revenue growth will expand further."

The race between U.S. and Chinese companies to secure memory supplies is directly driving up selling prices. Samsung Electronics is estimated to have already allocated about 70-80% of its planned 2027 memory production under long-term supply agreements (LTAs). "Competition among U.S. hyperscalers to secure even the remaining 20-30% of supply is intense," Kim said. "If China's four major CSPs also enter the fray, this will put upward pressure on memory prices in long-term supply contract negotiations."

The emergence of ultra-long-term contracts spanning 10 years is expected to bring structural improvements to the memory industry. "Anthropic's recent quarterly results showed that revenue growth outpaced the increase in computing costs, strengthening market confidence in AI monetization," Kim said. "If long-term supply contracts, which have traditionally been centered on five-year terms, expand to 10-year terms, Samsung Electronics' sales visibility and pricing power will be further strengthened."

Kim said, "Ultra-long-term supply contracts represent a structural change that will reduce volatility in the memory industry and improve long-term earnings visibility," adding, "They are expected to mark a turning point for a revaluation of Samsung Electronics' corporate value."

This content was produced with the assistance of AI translation services.