On June 23, the market traders suddenly found it’s hard to get DRAM chips when Hynix stopped dumping DDR 256Mb 32Mx8 333MHz in Hong Kong market and Samsung reduced the supply of its original modules to spot market, only released few DDR chips to the spot market.

Market participants swept away their worries and began to buy more parts in spot market. UTT got boosted from $4.10 on June 23 to $4.50 of today.

Even the demand has not shown as strong as expected. Many believe the market momentum will turn stronger since the second half of July. Taiwan top four makers’ motherboard shipment has increased slightly around 3% to 5% since early June. We still keep our optimistic projection for motherboard growth of 15% in the third quarter.

We believe the demand from Chinese market will emerge soon, leading the market up. Asian market other than China will see stronger demand in late July and August and the demand in European market will peak in October.

HP has announced a memory module recall program on June 25, 2004. According to its announcement, there’re around 90,000 notebooks mostly sold 6-12 ago with defected memory modules that could potentially result in blue screens, intermittent lock-ups or memory corruption.

However, we don’t expect the replacement will drive another wave of demand for memory chips or modules since there’s less than 20% of models on the recall list with defected modules and there’re four DRAM makers to share the replacement cost.

Coincidently, Intel also announced a recall on its new released Grantsdale chipset. This will further defer DRAM makers’ interest to speed up the DDR2 mass production.

We believe the DDR 256MB contract prices for the second half of July will likely keep flat since it’s really get the price lower further upon approaching the hot season. Most PC OEMs’ DRAM inventory levels are around 3-4 weeks and usually increase to 6 weeks during the hot season.

According to our checking, the inventory level in channels is also low, most are below one week. Therefore, once demand picks up, prices will be likely boosted higher, we believe.