It’s already 75% sold out before it’s even been made, but there’s one issue

More than 75% of the semiconductors Micron plans to manufacture next year have already been sold. The number of long-term supply contracts—in which customers purchase several years’ worth of inventory in advance—has risen by 63% in just three months, from 16 to 26, with a minimum value of $150 billion tied up in these agreements alone. Advance payments from customers have also surged from $22 billion to $32 billion.

Samsung Electronics and SK Hynix are following the same path. Last July, Samsung Electronics projected that once contracts currently under negotiation are finalized, 60–70% of its DRAM and NAND production capacity would be tied up in long-term contracts. SK Hynix has also concluded negotiations with about 10 companies.

However, there are both lower and upper limits on prices. This means that even if prices surge, companies won’t be able to pass on the full increase to customers. Micron’s decision to increase its capital expenditures by more than 85% also remains a variable affecting supply expansion.