SK hynix will supply at least three trillion won worth of semiconductors to U.S. IT company Microsoft (MS) annually.

Lee Seok-hee, president of SK Hynix, will meet with MS CEO Satya Nadella at the end of October to sign a memorandum of understanding (MOU).

The value of the latest deal exceeds 10 percent of SK hynix's sales (26,990.7 billion won) in 2019. SK hynix will supply DRAMs for servers, NAND-based solid state drives and systems on chips (SoCs) to MS.

Under the agreement, SK hynix increases semiconductor supply to MS, while MS will provide cloud services to SK hynix. Both companies are planning to jointly build an innovation lab based on MS cloud.

The planned innovation lab is a kind of collaboration platform that combines Microsoft's vast data processing capabilities and SK hynix's semiconductor technology. Its main goal is to implement semiconductor electronic design automation (EDA) more efficiently through high-performance cloud computing. MS also carried out collaboration with Taiwan's TSMC in August.

SK hynix will be able to offset much of the impact from the U.S. sanctions on Huawei through this agreement. According to Eugene Investment & Securities, SK hynix's major customers in 2019 were Apple (18.3 percent), Huawei (11.4 percent), SK (2.5 percent), Xiaomi (2.4 percent), and Intel (1.4 percent). SK hynix’s semiconductor sales to Huawei have been suspended since Sept. 15.