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Micron Locks In Historically High Memory Prices For Five Years (theregister.com) 93

Posted by BeauHD from the no-relief-in-sight dept.
Micron has signed 16 "strategic customer agreements" (SCAs) that include a floor price the company says comes with "a very robust gross margin for Micron, well above our peak quarterly margins in any past cycle." Most of the deals run through 2030 and cover about 40% of Micron's revenue. The Register reports: Micron CEO, president and chairman Sanjay Mehrotra explained the SCAs in prepared remarks delivered during the company's Q3 earnings call. He explained that Micron has signed 16 SCAs, most of them covering 2026 to 2030, and that they involve a commitment to buy a certain quantity of product and pay for it in a pricing band that has a floor and a ceiling price. The floor price covers the historically high gross margins mentioned above, and the ceiling price means those who commit to an SCA are insulated if memory prices go even higher.

The CEO said 16 customers have signed SCAs and then explained why it's worth locking into the deals even though they bake in such high margins. "Our customers are recognizing that supply shortages in memory and storage will take considerable time to improve," he said. "Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand."

Even massive efforts to build new chip fabs aren't much help, he said, because the increasing complexity of new memory types means it takes longer to build factories -- and when they come online there still won't be enough capacity to build both the high-bandwidth memory needed for AI and other types of NAND and DRAM. "Supply is structurally constrained in its growth and ability to meet industry demand, despite our comprehensive efforts to increase supply," he said.

Don't assume that SCAs mean your suppliers get price certainty, because Mehrotra said the deals will account for 40 percent of Micron revenue -- meaning the company is reserving most of its inventory to sell at prices it can negotiate. The CEO did have a little good news in the form of predictions that Micron's DRAM output in 2026 will "grow in the low- to mid-20s percentage range, slightly above our prior outlook." He also revealed that the SCAs see customers pay up front, which helps Micron to fund its fab expansions.

Micron Locks In Historically High Memory Prices For Five Years More | Reply

Micron Locks In Historically High Memory Prices For Five Years

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  • Raping users is back on the menu, boys! (Score:5, Insightful)

    by JustAnotherOldGuy ( 4145623 ) on Thursday June 25, 2026 @12:05PM (#66210170) Journal

    "Raping users is back on the menu, boys! Now get out there and change all the prices!"

    • Re: (Score:3)

      by Sebby ( 238625 )

      "Raping users is back on the menu, boys! Now get out there and change all the prices!"

      Yup, they're consumer rapists for sure.

    • Re: (Score:1)

      by Jeremi ( 14640 )

      Are computer purchases not consensual? Nobody is forcing you to buy overpriced RAM if you don't want to, so the rape analogy doesn't work.

      • > Are computer purchases not consensual? Nobody is forcing you to buy overpriced RAM if you don't want to, so the rape analogy doesn't work.

        "In both law and ethics, consent requires the freedom to choose without pressure, threats, or negative consequences"

  • Not necessarily bad for consumers (Score:3, Insightful)

    by Petersko ( 564140 ) on Thursday June 25, 2026 @12:13PM (#66210190)

    Sure, it's not great for anybody looking to build a new box, but there is an upside. If you're a gamer, your current kit got a life extension. And developers just got a reprieve from having to chase new tiers of hardware performance. I don't think it's a bad thing for the consumer world to just hole up, take a pause for a couple of years, and mature what's already in place. Look at what happens to console game performance on year 1 vs year 5. The hardware doesn't change, but everything gets better.

    Of course all of the other things that have ram may become problematic... but a lot of those don't use cutting edge ram. They use old shit because it's plentiful and cheap.

    Of course it's a mixed bag. I'm not claiming it doesn't irk me to see prices like this. I'm just saying it's not 100% bad.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      This is an excuse to keep prices high indefinitely. In 5 years time DDR6 will be shipping and they know what the market is willing to pay.

      • New products are born into the world they must inhabit. Complaining their pricing doesn't look like pricing from years ago isn't completely reasonable. Complaining that DDR5 pricing today doesn't look like pricing from two years ago makes perfect sense to me. Complaining about what DDR6 will cost isn't nearly as clearcut. To be clear, I would like a return to the old paradigm where pricing naturally drifts downward. I liked buying at the sweet spot of 2 year old tech. My current box has 128GB of DDR5 that h

    • Re: (Score:2, Interesting)

      by CubicleZombie ( 2590497 )

      I built my current desktop PC 12 years ago and it still does everything I need.

      Of course, the only game I run on it is the original Unreal, and that's 28 years old. (Yikes)

      • If you aren't playing the latest game, you don't need the latest hardware. I don't know about you, but I have so many games over the past 30 years to compare to any new game that most new titles fail to impress. Oh, new graphics? Whatever. Graphics have been great for the past 10 years. I'm sure COD 5000 will be a must play.

        I'll be happy to sit back and let the children get gouged for their must have new gaming system to run some shitty "free" online game that has them buying "skins" to look cool. Yawn. Mod

      • Mine just died so it's either buy an exact replacement for $120 or spend $300 and save $200 in electric costs over the new few years. There's so many options out there and they all just miss a different mark.

    • Let's get this clear: nothing gets better or cheaper.
      You rig didn't get a life extension.

      Whatever amount is in your rig is going to be what you can get until the prices come down on 'puny' RAM.
      And, those prices aren't gonna come down for a long time, if ever.
      There's always gonna be AI, and it will always get first dibs on whatever faster RAM becomes available.

      (And, this is posted by someone with a Threadripper 3960X, 128gigs of DDR4, and a Titan X)

      • Everything in tech has historically gotten better and cheaper. I paid $1000 in early 90s dollars for 4 x 4 MB of ram. That's $62 per megabyte. My 128GB kit would be unreliable slow and cost me $8 million, not even counting inflation, if what you said was true.

    • But my gaming kit is past due for upgrading.

    • No software of mine gets faster with updates (in the game development space - IDEs, game engines, etc). So, "hold on" translates to "see performance gets worse every day". I don't think the old console paradigm applies anymore, as the hardware is known these days

      • Re: (Score:2)

        by ceoyoyo ( 59147 )

        Play some early access games. They usually get a lot better with updates. Optimization is a thing.

        There is a very real phenomenon where software expands to fill available resources. You might have noticed it happening on your hard drive. [wikipedia.org]

        You can notice similar inflation here too, where computers that would have been practically magic 20 years ago are utter garbage. Even more apropos, memory today is outrageously priced, a truly civilization ending catastrophe, when it costs about half as much as it did ten y

    • And developers just got a reprieve from having to chase new tiers of hardware performance.

      Maybe we can return to a world of well optimised games rather than just throwing every damn asset into Unreal Engine, ticking the nanite box, shipping a chunky stutter fest of a game, and calling it a day.

  • Morons (Score:4, Insightful)

    by CEC-P ( 10248912 ) on Thursday June 25, 2026 @12:17PM (#66210198)
    If your customers can't buy PCs because there aren't any, nobody can but dumb AI bullshit. Also, most dumb AI bullshit will be bankrupt in 5 years regardless. I suggest they make some fucking DDR5 instead of HVM before they regret it.

    • Re: (Score:2)

      by Junta ( 36770 )

      Presumably, this is the whole point of these contracts, to hold the customers accountable for Micron making memory for them when the broader market is not necessarily looking for that particular memory.

      Now I don't see how this can work out in one of the more well documented ones. OpenAI had at least a trillion dollars of these sorts of purchasing commitments, and even pretty bullish assessments don't support their ability to make that much purchase. So I do anticipate the market failing to make their minim

    • Re: (Score:2)

      by AmiMoJo ( 196126 )

      Their entire business model is that you are reliant on their servers to run AI. The last thing they want is you buying a power PC that can run it locally.

  • I feel like this signals something. (Score:5, Interesting)

    by nightflameauto ( 6607976 ) on Thursday June 25, 2026 @01:14PM (#66210346)

    If a company is announcing that they've locked 16 bigger customers into historically high pricing, while locking themselves out of rising to meet future potential prices, is that a signal that we've about hit the peak of the memory demand / high-price cycle? Something tells me if they went out of their way to get these price floors in place, someone in the company saw the potential for that floor to be pierced in the next few months. I mean, you'd think the signing companies would consider this possibility too, but it's entirely possible that FOMO on AI is keeping them at the peak of the wave during negotiations.

    Something about this situation just strikes me as a tell. Maybe I'm wrong, but it seems like it's a predictor of something changing.

    • Re: (Score:3)

      by unami ( 1042872 )
      You could be right. Otoh, if they need the money upfront for building those fabs, the floor pricing might just cover that (+"healthy" margins).
    • Nothing will change, they like fixed prices, high demand, and saturated manufacturing capacity. Why expand when you can continue to plunder everyone for profit.

    • I mean... this is just like farmers selling some of their yet to be harvested crop on the futures markets.

      Sure, they could hold out for more, but something unexpected like a drought or a storm that damages their crops (or a war that shuts down the Hormuz strait) could happen.

      In other words... it's risk management. Just like Southwest did for years with fuel hedging. They paid more up front to lock in prices for longer, and it paid off when oil spiked.

      The customers want to guarantee a minimum supply even i

      • I wouldn't read anything into this other than Micron's management seems to be acting rationally.

        No wonder it's confusing. Business management hardly ever acts rationally.

    • Re: (Score:2)

      by evanh ( 627108 )

      Who are the 16? If they're shell companies then they can easily vanish when the AI bubble pops. Then the fixed term and quantity requirement becomes void.

      If they're something like OpenAI then the same applies. It's a one-trick pony that will collapse with the bubble bursting.

      • Re: (Score:2)

        by evanh ( 627108 )

        I could see Musk doing a deal in this fasion. Keep Grok hardware purchasing separated from Tesla/SpaceX and it can be folded up on a dime.

    • " is that a signal that we've about hit the peak of the memory demand / high-price cycle"

      There's two ways the cycle peaks:
      a) there's a bubble and it bursts. In this case this is just a money grab.
      b) There's a secular trend and suppliers increase their growth rate to meet it. Growth in futures contracts becomes the justification for growth in capex.

      The data supports the presence of a secular trend on top of the cycle, but memory suppliers keep getting burnt.

  • This all assumes prices won't go any higher than they are now. We don't know that. Prices could continue to rise over the coming months and years and they'll be smart to at least have locked in at this price, rather than paying marketing price. We'll have to see how it plays out but I can't imagine they're doing this with the belief that prices are gonna suddenly drop and they'll be paying higher than market rate. You don't sign a contract to lock in a price is you expect the market rate to decrease.

    • This all assumes prices won't go any higher than they are now. We don't know that. Prices could continue to rise over the coming months and years and they'll be smart to at least have locked in at this price, rather than paying marketing price. We'll have to see how it plays out but I can't imagine they're doing this with the belief that prices are gonna suddenly drop and they'll be paying higher than market rate. You don't sign a contract to lock in a price is you expect the market rate to decrease.

      But the producing company wouldn't be seeking those contracts if they expect prices to continue to climb. It's a bit of a conundrum, but the fact Micron is announcing these contracts makes me think the prices may be approaching peak, and they see some sort of decline coming in the next fiscal year or two.

      • Maybe, maybe not. Lots of companies lock in prices with a contract even if they could charge more down the road. Because it let's them know their production volume and investors like the solid locked-in sales. For instance, Western Digital sold its entire hard drive production capacity for the year back in February. They could have seen massively more profits had they not done that, sold them on the open market and enjoyed the huge increase in hard drive prices we've seen in recent months. But knowing they

  • Now we nerds are even turned down by RAM manufacturers... Maybe I do need to take up painting...
  • Historically high revenue, historically high profit margin - why exactly aren't you expanding your capability to meet demand?

    This should be how a company loses to the competition. Oh wait, it's a monopoly controlled by a handful of companies.
    • Dear sir, I see that you have good economic insight. My name is Fons and I am a representative of ACME. Have you heard how Ai is going to shape the world? Well, these people need RAM, DRAM! There is a shortage of it and my boss decided to jump in and construct a new DRAM factory! But he needs your help. Invest! Go all in, profit guaranteed*. This is a once in a lifetime opportunity. Make money be making Ai possible. Sign Here.

      * If Ai is a bubble and it bursts, you are on your own.

    • Who says they're not expanding?

      https://www.benzinga.com/tradi... [benzinga.com]

      "Micron expects fiscal fourth-quarter capital expenditures of around $10 billion, bringing total fiscal 2026 capital spending to approximately $27 billion. The investment pace isnâ(TM)t expected to slow anytime soon.

      Chief Financial Officer Mark Murphy said the company expects quarterly capital expenditures in fiscal 2027 to exceed fiscal fourth-quarter levels as Micron accelerates construction of new clean-room capacity to meet long-term A

    • Re: (Score:3)

      by geek ( 5680 )

      Micron started a new fab at their HQ in 2024 and it's barely halfway built. They have another one going up somewhere on the east coast also. They take years to build and many billions of dollars. They don't go up over night.

      I worked at Micron for almost 9 years and have seen the fabs being built. Its not small feat.

  • Micron boasts about price-fixing, loudly (Score:5, Insightful)

    by ebunga ( 95613 ) on Thursday June 25, 2026 @03:04PM (#66210674)

    What's old is new again.

    • Signing supply agreements with a customer is not price fixing in any way shape or form. Micron isn't telling other memory vendors to set a specific price. Micron isn't telling it's customers or suppliers to sell products at specific prices.

      You may not like the fact that RAM prices are high right now (I sure as hell don't), but this isn't price fixing, and supply agreements are common in most industries where a major customers require steady supply of parts.

  • No competition (Score:4, Insightful)

    by rsilvergun ( 571051 ) on Thursday June 25, 2026 @04:32PM (#66210854)
    They know nobody new is going to compete because we aren't enforcing antitrust law.

    Like it or not, is you want cheap RAM vote Democrat (or whatever your local equivalent is)

    Because mark my words in 10 years we'll find out they were all colluding. Just like the flat panel guys were

    • Re: (Score:2)

      by klui ( 457783 )

      Don't you mean the memory manufacturers who have been found to be colluding and pleaded guilty?

      https://en.wikipedia.org/wiki/... [wikipedia.org]

      • Sorry that was a long time ago and I'm sure they have learned their lesson and would never ever ever commit any crime ever again just because the current administration is not enforcing any of the laws and they fired all the people who would enforce the laws...

        Frankly you should be ashamed of yourself or even suggesting upstanding businessmen would do anything that might give them an unfair advantage in the market or that would unfairly disadvantaged consumers. Don't you just feel terrible now?

  • So when is CXMT and YMTC entering the chat?
    Asking for a friend...

  • How many AI start ups are going to last long enough to finish a 4 year memory purchasing agreement? The defaults are going to flood the market with excess inventory that Micron would have had to build and warehouse to keep their end of the agreement

  • Or "profits beyond reasonable repayment for capital, indicative of monopolistic, or monopsonistic, power over the other trade party".

    I think we need to codify what "normal" is, and what should happen otherwise. Winners won't willingly give up their winning lottery ticket unless forced.

    It isn't like Micron made any amazing technology leap, or strategic business decision that paid off. No, they're lucky. And those in power have decided that AI companies win.

  • This is great fodder for lawsuits around competition / anticompetitive business practices, and consumer protection lawsuits.

    On their face, individual agreements that lock in prices as a voluntary agreement are enforceable. However, an awful lot of laws kick in when they are more than an individual contract and from the story they're hitting 16 of the biggest ones, and therefore a lot of the market.

    Depending on the market such as the country or the state, there are potentially enormous penalties that can b

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