Microsoft purchasing executives who visited Korea earlier this month held supply contract (LTA) and pricing negotiations with SK hynix (000660.KS). SK hynix expressed its position that "it would be difficult to supply under the conditions MS wants." An industry source said, "Upon hearing this, the MS executive couldn't contain his anger and stormed out of the meeting."
According to industry sources on the 25th, as the global artificial intelligence (AI) semiconductor shortage intensifies, purchasing executives from global big tech companies including Microsoft and Google are converging on Korea to secure supply. "Purchasing executives from major big tech headquarters including MS, Google, and Meta are practically residing in Korea to sign memory supply contracts with Samsung Electronics (005930.KS) and SK hynix," an industry source explained. They are waging an all-out battle to secure memory semiconductors essential for AI chips and data center construction, including high bandwidth memory (HBM), DRAM, and enterprise solid-state drives (eSSD).
Big tech purchasing executives are pleading with SK hynix and Samsung Electronics because they cannot gain competitive advantage in the AI industry without high-performance, low-power memory semiconductors. AI computation and inference capabilities depend on graphics processing units (GPUs), tensor processing units (TPUs), and data center performance. GPUs and TPUs require HBM, while AI data centers need LPDDR to achieve high performance. Only three companies in the world can produce high-performance HBM and LPDDR: SK hynix, Samsung Electronics, and Micron. In particular, SK hynix and Samsung Electronics, which are competing for industry leadership, have reportedly already signed sales contracts for all HBM and DRAM production through next year. With memory semiconductors drying up in the market, big tech purchasing executives are stationed in Korea pleading for supply.
Google, which is pursuing external sales of its proprietary AI accelerator TPU, reportedly fired the responsible executive after facing memory supply difficulties. Google currently sources approximately 60% of the HBM installed in its TPUs from Samsung Electronics. When TPU demand recently exceeded expectations, Google inquired with SK hynix and Micron about securing additional supply. The answer was "impossible." Google management reportedly fired the purchasing staff, holding them responsible for supply chain risks caused by failing to sign LTAs in advance. This was a disciplinary personnel action against staff who failed to secure supply in time.
Big tech companies are going beyond simple volume orders and even changing their hiring practices, staking their survival on Asian supply chain management. Whereas memory purchasing managers previously worked at Silicon Valley or Seattle headquarters, the recent trend is to hire workers based in Korea, Taiwan, Singapore, and other Asian regions. This is interpreted as an intention to closely manage supply chains locally in Asia, where major semiconductor manufacturers including Samsung Electronics, SK hynix, and TSMC are located.
Google recently posted a job opening for a Global Memory Commodity Manager, seeking an expert in sourcing strategy for data center memory including DRAM and NAND flash. Meta is also recruiting under the title Memory Silicon Global Sourcing Manager, looking for talent capable of technology roadmap collaboration. This is a strategy to deploy experts with engineering knowledge locally to achieve both technical consultation and volume procurement. "Currently, big tech companies are placing open-ended orders with the three memory companies, asking for all available volume regardless of price," an industry source said. "Both Samsung and SK have their advanced process lines for HBM and other products running at full capacity, so it's physically difficult to meet all their demands."