Chinese technology giants are revealed to be desperate? Ask South Korea for help, the memory contract has been signed for 10 years

Following large U.S. technology companies, major Chinese cloud service providers (CSPs) including Alibaba, Tencent and ByteDance have also begun to apply for long-term supply agreements (LTA) for server memory from Samsung Electronics and SK Hynix. South Korea's "Daily Economic News" reported that "desperate" large Chinese technology companies sent a "distress signal" to Samsung Electronics and SK Hynix, requesting the signing of ultra-long-term contracts to extend the memory supply period to 2035, up to 10 years, far beyond the usual 3 to 5-year supply cycle.

According to industry insiders on the 27th, cloud service providers in Greater China such as Alibaba, Tencent and ByteDance are currently negotiating long-term supply agreements for server DRAM with domestic memory manufacturers. As large U.S. technology companies secure memory supplies through long-term supply agreements, Chinese cloud service providers are expanding their business to join the competition for South Korean memory supplies. The products they need are server double data rate (DDR) and low-power double data rate (LPDDR) memory.

DDR is a type of main memory that enables the server's central processing unit (CPU) to quickly read and write data. LPDDR is a low-power memory mainly used in smartphones. According to the report, since LPDDR can improve the energy efficiency of artificial intelligence (AI) servers, especially when memory supply is in short supply, server companies are competing to purchase LPDDR.

Although China has memory manufacturers such as Changxin Memory and Yangtze Memory, they are considered to lag behind domestic companies in terms of product competitiveness and mass production scale of high-performance server memory. Greater China cloud service providers (CSPs) have difficulty procuring the required amount of memory domestically, which is believed to be one of the reasons they seek to sign long-term agreements (LTA) with Korean companies.

The fact that large U.S. technology companies are the first to secure large amounts of memory through long-term contracts also appears to be accelerating the actions of Chinese cloud service providers. Samsung Electronics said it has signed contracts with the world's top five data center customers and is currently negotiating with five other major customers.

Industry insiders believe that these customers are Amazon Web Services (AWS), Microsoft, Google Cloud, Meta and Oracle. SK hynix also announced that it has completed long-term agreement negotiations with approximately 10 entities, including important customers. According to reports, the memory purchase requirements proposed by Chinese cloud service providers have nothing to do with existing contracts.

Industry insiders estimate that 70% to 80% of the memory production capacity planned by Samsung Electronics and SK Hynix next year will come from five-year long-term agreements signed with large global technology companies.