Memory Prices Would Have to Fall 91% Before Samsung Burns Cash

Memory Prices Would Have to Fall 91% Before Samsung Burns Cash

This chart is not a record of what has happened. It is a broker's stress test, asking how far memory prices would have to fall from today's highs before the pain becomes real.

The answer comes in three layers. A 47% drop only returns Samsung's memory operating margin to the peak of the previous cycle. Another 20 percentage points below that, roughly 60% down from the top, is where long-term supply agreements start being renegotiated. To push prices all the way to cash cost takes a fall of 91% from the peak.

■ The middle layer is what is new this cycle

Memory used to be priced quarterly, so a collapse showed up in the next quarter's accounts. This year large buyers and suppliers moved to three- and five-year contracts with price floors and take-or-pay clauses. The first leg of any decline gets absorbed by those contracts, which means the pressure point is not the size of the fall but the moment the contracts stop holding.

Softening the cycle is not the same as ending it. People in the industry put it plainly: long-term deals make the swings smaller, they do not remove them.

Note also that everything on the chart after 2027 is a modelled scenario, not a market quote.

Source: Broker stress-test analysis on memory pricing (Image: @pequityresearch)