Chavi Mehta and Jane Lanhee Lee

SAN FRANCISCO (Reuters), – Chipmaker Micron Technology Inc. (NASDAQ:) has announced that they are testing a new pricing model called forward pricing agreements for their chips. This will aim to stabilise the high price swings that have plagued the industry.

Sumit Sadana was Micron’s chief of business at its investor day. He said, “I’m very excited to announce the signing of a top 10 client on this model with Us, which is more than 500 million in annual revenue for a 3 year agreement,”

While he declined to estimate how many long-term customer agreements would move to this pricing system, he said that it was an “experiment.” According to him, the long-term deals are currently based upon volume rather than prices. Forward pricing agreements include both pricing and volume.

Sadana said, “The contracts will not be enforced.”

Sadana stated that Micron has no plans to reduce its gross margins in order to promote forward pricing agreements.

Sadana stated that there will be ups as well as downs but ultimately the benefits of an agreement such is more than the risk.