Hardware Procurement Shifts Toward Prepayment and Multiyear Supply Deals
Summary
Ericsson and five hardware peers are prepaying, stockpiling, signing multiyear supply deals, or repricing as AI demand tightens memory supply.
From October 15 to 28, 2026, Ericsson (ERIC), Garmin (GRMN), GE HealthCare (GEHC), Extreme Networks (EXTR), MicroVision (MVIS), and One Stop Systems (OSS) said in earnings calls or call summaries that AI infrastructure demand was increasing the cost, lead time, and inventory requirements for memory and adjacent chips.[1][2][3][4][5][6]
Hardware vendors are trading cash for delivery certainty
Memory used to be one component among many in a hardware product. It can now determine whether a complete system ships on time. AI servers consume large amounts of memory and also draw on adjacent capacity for switch silicon and programmable chips. When ordinary purchasing cannot secure enough supply, equipment vendors must order earlier, prepay, build safety stock, or sign multiyear agreements. Those actions use cash before revenue arrives, but they protect existing orders and delivery schedules.
The shift now extends beyond data centers. Garmin is using lower-cost safety stock to support current results while prepaying for critical components. GE HealthCare signed multiyear agreements with technology partners to secure memory. MicroVision and OSS used pre-buys to reduce the risk of later production interruptions.[2][3][5][6] Across these companies, procurement is shifting from minimizing current inventory to ensuring that supply will be available for the next several quarters.
Inventory spending, lead-time advantages, and price increases coexist
Supply protection is producing three different operating outcomes. OSS said long lead times for memory, switch chips, and GPUs required a $7.8 million inventory investment in the first half of 2026 to protect delivery. It also said industry-wide component cost increases were flowing through to customers.[6] Extreme Networks has included higher memory costs in its current gross margin and guidance while securing full supply into fiscal 2028. Shorter lead times let the company compete for orders while raising prices less aggressively than constrained rivals.[4]
Ericsson is taking a more direct route. The company first used product substitution and upselling to offset costs, then broadened price increases in tenders and existing customer discussions. Management described the pressure as structural and said:
“Everyone is having the same challenge, meaning in the end, we as a supplier cannot absorb these costs. They have to be passed on.”
The same shortage can therefore consume cash and pressure margins at one vendor while giving a supply-secured competitor an advantage in lead times and pricing.[1]
Procurement control is moving toward long-term supply commitments
The hardware value chain is shifting from one-time purchase prices toward the ability to reserve capacity early. Equipment vendors absorb working-capital pressure through prepayments and inventory, while customers may bear part of the cost through equipment price increases or contract resets. Memory suppliers gain longer commitments in return. Micron (MU) reported $32 billion of customer commitments and said more than 75% of its 2027 output was already committed, showing how vendors' supply-assurance behavior appears upstream.
The conclusion has clear limits. Nokia (NOK) said memory was not material in its bill of materials and managed the exposure through long-term agreements. Cisco also said networking experienced less demand pull-forward than computing. Investors should therefore track equipment-vendor inventory and prepayments, gross margins, lead times, and customer repricing together. Memory spot prices alone cannot show that every vendor faces the same impact.
Companies exposed to the same shift
- Hewlett Packard Enterprise (HPE): DDR5, NAND, and wafer shortages constrained shipments of record orders, while larger purchase commitments and inventory exposed the company to the same cash-for-delivery mechanism.
- Micron (MU): Vendors' efforts to reserve supply become multiyear customer commitments for the memory producer, although future capacity and demand will determine whether strong pricing persists.
- Nokia (NOK): The company faces the same semiconductor ecosystem but reports lower memory intensity, making it a useful test of whether product architecture determines the actual impact.
Sources
[1] Drillr · Ericsson · 2026-10-15 · Q3 2026 earnings call
“Everyone is having the same challenge, meaning in the end, we as a supplier cannot absorb these costs. They have to be passed on.”
[2] Drillr · Garmin · 2026-10-28 · Q3 2026 earnings call summary
[3] Drillr · GE HealthCare · 2026-10-28 · Q3 2026 earnings call summary
[4] Drillr · Extreme Networks · 2026-10-28 · Fiscal Q1 2027 earnings call summary
[5] Drillr · MicroVision · 2026-10-28 · Q3 2026 earnings call summary
[6] Drillr · One Stop Systems · 2026-10-28 · Q3 2026 earnings call summary
This article identifies potentially overlooked industry changes and companies. It is not an investment recommendation.