Upside Risk.

:: Longer view - critical assumption is that DRAM suppliers will adjust production.

As most marketers currently expect oversupply condition to persist during 2Q03. Without further cutbacks in supply, memory chip manufacturing will likely remain unprofitable throughout 1H03. Consolidation among producers that curtails supply is the most beneficial upside risk for pricing. We observe some tier one companies are actually silently shifting more capacity than what they announced to do flash product or other products for better product mix. However, Taiwanese companies are ramping up their 300-mm wafers. Albeit at market is still oversupply in current situation especially for the spot market, contract base market probably will be hedged to a better prices negotiable range once those tier one DRAM companies really adjust production for lower demand environment.

:: Short-term - the possibilities of replenishing inventory for War Issue.

Recently, the market sentiment shows a slight replenishing inventory activities spread over the food-chain. PC OEM/ODM companies are requesting their supply chain to prepare safety inventory level in case of War issue to impact the prices or even the shipment. Considering the uncertainties of economic weakness has spread to consumer spending and all impetus for expansion has been removed, companies are conservative to accelerate more inventory. Demand for replenishment will be limited and can't support the prices continues to rise up too high.

:: SDRAM demand dismiss from market.

As SDRAM prices overshot, demand dismissed. Not only the requests and inquires are slowing down and volume declines on the spot market, volume and demand for contract base sharply declined as most models shifted to DDR base and remain some servers and workstations using the high-end SDRAM modules. Contract prices for those high-end SDRAM modules are relative stable and profitable on the other word.

:: Up or down depending on US?

Will you bid on continuing uptrend in prices or you think it will stop soon? Based on our survey, marketers felt recent demands were not solid enough to believe those are truly end-demand. DRAM makers pull up the prices easily while there almost no inventory in the channel sides to maintain the prices level in short-term. However, for longer -term it has really to depend on the truly demand. We have to observed more US purchase activities to decide even this replenishing demand is already turnaround or just China market and Europe market get back a little. In short- we believe past the current excess supply difficulties prices should stabilize at its long-term downward trend, but in the very short-term we believe prices have the chance to keep up a little bit if the purchasing activities continue to spread over the industry for aggregating some inventory.