DRAM Rally Unstoppable: SK Hynix Reportedly Scraps Long-Term Contract Price Caps, Samsung Targets Another 20% Hike in Q3

The global memory market is entering a new phase where sellers hold significant leverage. As artificial intelligence (AI) demand continues to ignite supply shortages, South Korea's two memory giants are not only adopting more aggressive pricing strategies but are also diverging significantly on contract structures. Samsung Electronics (005930.KS) is reportedly targeting an additional price increase of up to 20% on DRAM average selling prices (ASP) for the third quarter, while SK Hynix (000660.KS) has been revealed to have eliminated price ceilings in its long-term supply contracts, attempting to fully capture the excess profits of this upcycle.

According to a report by South Korean media outlet ZDNET, Samsung Electronics is engaged in a new round of price negotiations with clients, aiming to significantly raise DRAM ASPs in the third quarter of 2026 compared to the second quarter. A semiconductor industry source revealed that Samsung has taken an extremely firm stance in these talks, planning price increases exceeding 20%. For low-power memory (LPDDR), where supply bottlenecks are most severe, the increase could even break through the 20% ceiling, though the final magnitude will depend on customer acceptance.

The backdrop to this wave of price hikes is that memory prices have been soaring for several consecutive quarters. According to statistics, Samsung Electronics' DRAM ASP surged approximately 90% quarter-over-quarter in the first quarter of 2026, followed by a further 50% to 60% increase in the second quarter. Despite this high base, Samsung shows no intention of relenting, indicating its highly optimistic assessment of the supply-demand gap in the second half of the year. In comparison, SK Hynix's DRAM ASP increase is estimated to be slightly lower than Samsung's due to the higher proportion of High Bandwidth Memory (HBM) in its product mix, but its overall profit explosive power is equally astonishing.

Contract Rules Rewritten: SK Hynix Breaks the Ceiling, Micron Holds the Line

Beyond soaring prices, memory giants are adopting starkly different approaches to the design of long-term supply agreements (LTAs), which will profoundly shape the market landscape in the coming years.

Market sources indicate that SK Hynix is adopting a new contract framework, eliminating the industry-standard price ceiling in its latest long-term supply agreements. Traditional memory procurement LTAs typically set price caps and floors to limit volatility, but with demand from AI servers and data centers exploding, SK Hynix has chosen to break with convention. Sources say this means that when spot market prices are driven higher by supply shortages, SK Hynix's LTA supply prices can fully reflect the upward adjustment, no longer suppressed by a ceiling—a move undoubtedly aimed at maximizing profit opportunities during the upcycle.

However, U.S. memory giant Micron Technology (MU) has chosen a completely different strategy. It is understood that in recently signed strategic customer agreements, Micron has retained the mechanism of both price ceilings and floors. It not only set the price cap at the highest market level of the second quarter of 2026 but also established a minimum price guarantee for the entire contract period, requiring customers to commit to binding purchase volumes. Notably, Micron has extended the application scope of LTAs to the automotive sector, recently announcing a significant memory supply LTA with General Motors, demonstrating its preference for securing long-term, stable partnerships through volume commitments.

Regarding contract duration, major players are also extending their battle lines. Market reports indicate that both Samsung and SK Hynix have extended traditional one-year supply contracts to three to five years, while Micron is also preparing to extend its LTA duration to five years, with automotive LTAs set at three years. This shows that both buyers and sellers are preparing for a prolonged memory supply shortage.

Profit Surge: Gross Margins Approach Cyclical Peaks

The profitability of memory manufacturers has reached staggering levels during this rally. According to estimates by investment research firm Bernstein, SK Hynix's DRAM gross margin is expected to hit 90.9% in the second quarter of this year, approaching what the market generally considers the peak of the cycle. A report from BOCOM International further corroborates this trend, noting that Micron's DRAM unit price rose over 60% quarter-over-quarter in its most recent quarter, while NAND Flash unit prices rose nearly 85%, leading to a significant upward revision of SK Hynix's earnings forecasts.

BOCOM International believes that the duration and magnitude of elevated memory chip prices may further exceed prior expectations, pushing back the timeline for memory supply shortages by two more quarters, extending at least through the fourth quarter of 2027. The firm even predicts that even if prices decline in 2028, the volatility will be milder than in the past. To reflect this super-cycle, BOCOM International significantly raised its target price for SK Hynix to 3.5 million South Korean won (approximately $2,450), noting that SK Hynix's expansion pace for DRAM and NAND Flash will be more aggressive than before to meet its long-term goal of reaching monthly DRAM production of 1 million wafers by 2030.

However, semiconductor equity research institutions also caution investors that the industry generally estimates the peak range for DRAM gross margins at 88% to 92%. At such a high base, investors need to monitor the sustainability of high margins and watch the catch-up speed of Chinese competitors such as ChangXin Memory Technologies.

End-Market Impact and Long-Term Outlook

The sharp DRAM rally will first impact the consumer electronics supply chain. Smartphone and personal computer manufacturers are facing higher component cost pressures; OEMs must choose between absorbing costs themselves or passing them on to consumers through higher end-product prices. The market is about to welcome flagship devices such as Samsung's next-generation foldable phone, the Galaxy Z Fold 8 series, and Apple's (AAPL) first foldable iPhone. DRAM price increases will directly affect the cost structure of subsequent phones. Industry sources note that flagship models that have already stocked up on memory for the third quarter will see limited impact, but devices scheduled for launch from the fourth quarter of 2026 to the first quarter of 2027 will find it harder to cope with rising component costs.

TrendForce, analyzing the supply-demand structure, estimates that DRAM contract price increases will moderate to 13% to 18% in the third quarter of 2026, slightly below Samsung's stated 20% target, primarily due to weak consumer application demand and a higher comparison base. However, the firm also emphasizes that as more customers lock in supply through long-term supply agreements, coupled with the renegotiation of HBM prices, this will help prevent a sharp reversal in the DRAM market next year.

Looking ahead, while the magnitude of DRAM price increases may gradually moderate, with unabated AI infrastructure investment and supply-side expansion still requiring time, memory manufacturers' high-profit posture is expected to persist beyond 2027.