Positive outlook for this week.

:: Prices are being driven up by the Supply side.

As anticipated, market activity over the past week has been completely dominated by the supply side. DRAM makers have succeeded in raising up spot prices with help from an improving market sentiment (It appears that DRAM makers - lead by tier 1 DRAM makers- are controlling their supply to the market in order to prop up ASP right now.). This emotionally driven phenomenon has, however, had its absurd moments- as most marketers continue to have a consensus view that there will be an oversupply situation during the typically slowest season for DRAM demand (2Q). We haven't seen any data points opposing that 2Q will, as it is traditionally, continue to be the slowest PC season. However, PC OEM companies are accumulating inventory from previously less than 1 week to 1.5 weeks or higher.

:: End demand remains sluggish.

From our simple survey from DRAM makers, module makers, distributors, channels and traders - they all indicate that end-demand remains weak. The anticipation that prices can trade up plus the previous low inventory level creates a certain room for arbitrage. Now some aggressive module makers have increased inventory somewhat to over 2 weeks; distributors have also increased inventory up to 2 weeks; channels and traders are currently jus several days. Inventory is being built up in the food chain. As long as the trading activities continue to move around, the prices still have chance to move up a little bit and current inventory levels in the food chain are still at an acceptable level.

:: Spot prices are still looking to have a moderate upside this week.

The unbalanced allocation on 128Mb SDRAM chips has caused huge prices jump since last week, we believe in the short-term we could continue to see this kind of price gap with 128Mb DDR sustained, since it has become a rare product in the spot market. For DDR spot prices, we believe the current progress in price stability and appreciation will continue to be held by DRAM makers and market sentiment will remain positive for a while. We hold a moderate upside attitude as long as the market confidence doesn't waiver and push down prices. However, the DRAM market's volatility depends on the market sentiment of the moment, and we would not be surprised to see another brief setback at the end of month.