[Edaily Reporter Kim Kyung-eun ] On the 28th, KB Securities analyzed that SamsungElectronics(005930)is expected to see improved profitability and a revaluation of its corporate value as competition among global Big Tech companies to secure memory chips intensifies, leading to an expansion of long-term supply contracts. In particular, the firm projected that if memory supply contracts—which have traditionally been centered on 5-year terms—are extended to 10-year terms, earnings volatility will decrease and pricing power will strengthen.

Kim Dong-won, Head of Research at KB Securities, stated in a report released today, “As Chinese cloud providers join the competition to secure long-term supply, if the current five-year-centric long-term supply contracts are extended to 10-year terms, SamsungElectronics’ sales visibility and pricing power will be further strengthened.”

It has recently been reported that China’s four major cloud service providers (CSPs)—Alibaba, Baidu, Tencent, and ByteDance—have requested 10-year long-term contracts from major memory manufacturers, including SamsungElectronics, to supply DDR5 and LPDDR5X server DRAM through 2035.

KB Securities analyzed that this is because the Chinese memory manufacturer Changxin Memory Technology (CXMT) lags behind SamsungElectronics and SK hynix in terms of technological capabilities and mass production stability for high-performance DRAM used in artificial intelligence (AI) servers.

Currently, Chinese cloud service providers are estimated to account for 7–8% of SamsungElectronics’ total DRAM revenue. The firm expects that if long-term supply contracts are signed in the future, there will be significant potential for revenue growth through Chinese customers.

It is estimated that SamsungElectronics has already allocated approximately 70–80% of its planned memory production volume for 2027 through long-term supply agreements (LTAs). Competition among major U.S. cloud providers to secure the remaining 20–30% of the volume continues.

Analysts suggest that if Chinese Big Tech companies join the competition to secure supply, SamsungElectronics’ pricing power could increase further. This is because, in a situation of limited supply, the more competition intensifies among customers, the greater the upward pressure on prices for long-term supply contracts may become.

Improved profitability in the AI industry was also cited as a factor supporting memory demand. Recent quarterly results from Anthropic showed that the growth rate of AI revenue outpaced the growth rate of computing costs, which is seen as having strengthened market confidence in expanded AI investment.

KB Securities predicted that Anthropic’s expansion of investment capital through its initial public offering (IPO) would alleviate funding concerns in the AI industry and lead to increased investment in AI infrastructure. This is also expected to have a positive impact on the growing demand for server memory.

Division Head Kim emphasized, “The 10-year ultra-long-term supply contract is a structural change that mitigates volatility in the memory industry and enhances long-term profit visibility,” adding, “It will spur a revaluation of SamsungElectronics’ valuation and serve as a turning point for the reassessment of its corporate value.”