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DRAM stocks up on supply shortage hopes

TAIPEI -- Shares of DRAM chips moved higher yesterday morning on hopes that a supply shortage will continue into the first quarter of this year, dealers said.

The supply shortage expectations were raised after, the chairman of DRAM module supplier ADATA Technology Co., Simon Chen, gave an upbeat assessment of the market outlook a day earlier, saying that the industry could even see tight supply in the entire first half of this year, the dealers said.

As of 11:34 a.m., shares of Nanya Technology Corp. had added 5.74 percent to NT$4.24 (US$0.14) and shares of Inotera Memories Inc. had risen 3.41 percent to NT$22.75, while shares of ADATA had gained 5.27 percent to NT$73.90.

The weighted index on the Taiwan Stock Exchange was down 0.13 percent at 8,600.54 points.

“As ADATA is one of Taiwan's leading DRAM module suppliers, it is no surprise that the company's optimistic comments drove memory chip stocks higher soon after the local bourse opened,” Asia Securities Investment Consultant analyst Chang Chih-chen said.

“As the new year starts, investors with a large amount of funds to invest tend to pay close attention to such a positive lead,” Chang said.

Speaking to the press, Chen said that ever since Sept. 4, when a fire engulfed a plant of South Korea's SK Hynix Inc. in Wuxi, in China's Jiangsu Province, the DRAM supply has become tighter than ever. Hynix ranks as the second-largest DRAM supplier in the world and the Wuxi plant accounted for 12-15 percent of the global DRAM production.

As the plant's operations have been affected by the fire, reducing supplies, the price of the benchmark DDR3 2Gb DRAM chip has skyrocketed more than 40 percent.

Chen said that as production of a clean room at the Hynix factory will not be fully restored until September, the impact on the global DRAM supply will last longer than expected.

The ADATA executive said it is very likely that a DRAM supply shortage will continue into the first quarter of this year, and if demand for the second quarter remains strong, such a supply shortage could also be seen in the second quarter.

The executive said the semiconductor industry will enter a peak season in the second half of this year, with demand for memory chips for cloud technology-based products and server makers expected to remain solid.

“But I am not as upbeat as Chen, because demand in the personal computer market remains slow, which could keep impacting the memory chip business,” Chang said.

“In addition, although the Hynix fire has driven DRAM prices sharply higher, the price growth has been slowing in recent sessions,” Chang said.

“As these DRAM stocks have been boosted by the supply shortage leads for some time, I prefer to advise investors to hold a cautious attitude when trading these stocks,” he said.

Chang said it is likely that shares of Nanya and Inotera will face stiff technical resistance at around NT$4.9 and NT$23, respectively, while shares of ADATA could be capped at around NT$79.20.

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