SK hynix said it sets the contract period of long-term supply agreements (LTAs) signed with customers at typically five years. The contracts also include enforcement mechanisms such as customers' mid- to long-term purchase commitments and deposits.
In a conference call on July 29 for its second-quarter earnings, SK hynix said, "We are designing the LTAs under discussion in various forms, comprehensively considering the characteristics of the customers and products," and added, "While the contract period is generally based on five years, specific terms may vary depending on the customer and product."
Prices are not fixed in a single way; they are negotiated with each customer to respond to market fluctuations. The company said it plans to use this approach to reduce uncertainty from short-term memory price swings and to secure mid- to long-term business stability for customers and SK hynix.
SK hynix said, "Given the impact of demand volatility on the memory cycle, securing customers' substantive purchase commitments is also important," and added, "We include mechanisms such as purchase commitments for mid- to long-term volumes and deposits to enhance contract enforceability and demand visibility." It added, "Specific terms may vary depending on customer-by-customer negotiations and contract structure."