DRAM makers hold $38B in prepayments, but their leverage may evaporate by 2029

Samsung, SK hynix, and Micron have cemented their dominance in the DRAM market by securing a record $38 billion in advance payments from customers. The funds come from long-term contracts with fixed pricing that extend through 2030. Analysts warn, however, that this balance of power is temporary, and the manufacturers could lose their edge as early as 2029.

According to DigiTimes, the new business model has allowed the three major players to move away from the volatility and razor-thin margins of the past. They now set the terms, requiring buyers to pay upfront for guaranteed supply. Similar agreements existed before, but this is the first time customers are widely depositing money in advance to secure access to chips.

The financial results are striking. Micron has already collected $18 billion in cash from $22 billion in contracted deposits pledged by 16 strategic partners. Samsung signed five-year deals and has received 25 percent of its guaranteed payments. SanDisk holds $16.5 billion in deposits, while SK hynix has taken payments from ten customers. Together, these sums account for the $38 billion in prepayments, collateral, and guarantees.

Experts note that the strategy looks far-sighted, but it has an expiration date. The protective mechanisms, including price floors and collateral, will stop working by the end of the decade. The pivotal moment is expected in 2029, when the companies will find themselves without their $38 billion safety net. Another factor is the ramp-up of fabrication plants to full capacity, which will push the market back to a normal state.

By that point, Samsung, SK hynix, and Micron will likely lose their ability to demand such large prepayments or dictate supply terms. The balance of power in the DRAM market could shift toward buyers, who will regain their negotiating leverage.