Taipei, March 5 (CNA) Shares of Taiwan-based dynamic random access memory (DRAM) chip makers got a boost Tuesday morning after spot market prices for a benchmark DRAM chip hit a 20-month high on Monday, dealers said.
The buying reflected investor optimism that DRAM makers will continue to benefit from an improvement in the overall market climate, which could strengthen their bottom lines, they said.
As of 11:34 a.m., shares of Nanya Technology Corp., Taiwan's largest DRAM maker, had risen by the maximum daily increase of 7 percent to NT$3.21 (US$0.11), while shares of Inotera Memories Inc. had gained 5.0 percent to NT$7.35.
The benchmark weighted index on the Taiwan Stock Exchange was up 0.50 percent at 7,906.99.
"The price recovery showed signs that the sector's efforts in cutting production to lower inventory have paid off," Horizon Securities analyst Benson Huang said.
"It seems that the industry is moving toward a balance between supply and demand, paving the path for a continued rebound, as the global economy is on the way to recovery," Huang said.
According to the latest report released by TrendForce Corp., a Taipei-based market information advisory firm, the spot market price of the benchmark DDR3 2Gb DRAM rose 5.55 percent in the first two business days in March from the end of February, hitting a 20-month high of US$1.52 (NT$45.14) on Monday.
The 5.5 percent increase followed a 34.6 percent jump in prices in the first two months of this year from the end of last year.
In an earlier report, TrendForce said DDR3 2Gb DRAM chip prices in the spot market in February rose 9.92 percent from the second half of January, while contract prices for the DRAM chip in February were up 13.68 percent from the second half of the previous month.
"The global DRAM industry is consolidating, which could lead to a further decline in supply," Huang said.
Huang pointed to the Tokyo District Court's approval of U.S.-based Micron Technology Inc.'s acquisition of Japan's Elpida Memory Inc. and Nanya Technology's decision to gradually retreat from the commodity DRAM business and shift to specialty DRAM production as signs of the sector's consolidation.
Commodity DRAMs are used in personal computer production, while specialty DRAMs are used in mobile devices and servers.
"To my knowledge, some PC makers have resumed restocking commodity DRAMs on fears that the cut in commodity DRAM production could produce a supply shortage in the second half of this year, when the peak season of the PC business arrives," Huang said.
"On the back of further price rebounds, many investors have embraced high hopes that DRAM makers, like Nanya Technology and Inotera Memories, will narrow their losses this year," Huang said.
Nanya Technology posted a net loss of NT$8.88 billion in the fourth quarter of last year, which was an improvement on the NT$10.09 billion net loss recorded a quarter earlier.
The bottom line of Inotera Memories also improved to a net loss of NT$3.72 billion in the fourth quarter from a net loss of NT$4.39 billion posted a quarter earlier.