The surge in memory prices due to increased investment in artificial intelligence (AI) servers is impacting the public procurement market. Domestic security companies supplying firewalls and intrusion prevention systems (IPS) through the Multi-Agency Supply Contract (MAS) with the Public Procurement Service are facing significant cost burdens as memory prices have soared since their contracts were signed, yet they are unable to adjust delivery prices.
According to the Public Procurement Service and the security industry on August 4, companies such as AhnLab, Xgate, and SecuEye are supplying firewalls and IPS to public institutions through the MAS. IPS devices analyze network traffic in real-time to block malicious activities and require higher-performance memory compared to standard IT equipment to handle large volumes of data.
The registered IPS products range in price from several million won to nearly 50 million won. Xgate's products are priced between 18.92 million and 40.15 million won, AhnLab's range from 25.21 million to 49.50 million won, and SecuEye offers products priced up to 49.83 million won. The industry explains that higher-end equipment, which typically has a greater memory capacity, is more significantly affected by the recent surge in memory prices.
The challenge lies in the inability to reflect the increased costs in delivery prices after contracts are signed. MAS contracts for firewall equipment are typically established on an annual basis, making it difficult to adjust prices even if component costs rise sharply in the interim.
According to market research firm DRAM Exchange, the fixed transaction price for general-purpose DRAM (DDR4 8Gb 1Gx8) has been on the rise since the end of last year. The average fixed transaction price in July was $24, up 14.3% from the previous month’s $21, marking the highest level on a monthly average basis. Since the end of last year, the significant increase in DRAM prices has also raised the manufacturing costs for servers and security equipment.
A security industry representative stated, "Compared to the time of contract last year, memory prices have risen significantly, and the cost burden is considerable now. Public projects cannot easily adjust contract prices, so we are continuing deliveries while accepting a decline in profitability."
Another industry source noted, "While the cost is burdensome, it is also difficult to secure the necessary memory in a timely manner. In some cases, we have to pay a premium to obtain supplies to fulfill contracts."
The industry believes that as the volatility of memory prices increases due to the spread of AI, there is a need for institutional improvements that can reflect rapid cost increases in public procurement contracts. The Public Procurement Service is also recognizing the burden on companies due to rising raw material prices and is exploring various measures to improve contract systems in response to the semiconductor price surge, including requesting cost breakdowns from some suppliers.
* This article has been translated by AI.
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