Market watcher Gartner yesterday echoed Hynix and others, and announced that the global memory business is "on the verge of recovery".

However, it forecast that the recovery will be "tentative" - it remains only a "possibility" - and warned DRAM manufacturers and suppliers not to overreact and excessively ramp up output.

The recovery may be slow, but Q3 will still see an increase in sales of nearly 38 per cent over the year-ago quarter, Gartner predicted. It expects Q3 DRAM revenue to hit $5.1 billion.

For the year as a whole, sales should total $18.9 billion, up 21.8 per cent on last year.

Norwood pointed to stabilising and rising prices in the spot and contract markets as a key indicator of improving trading conditions. Average selling prices will rise 20.3 per cent during the current quarter, with 256Mb parts reaching, on average, $5.55 a pop.

Keeping supply tight is crucial to maintaining that trend, said Norwood.

"Recent cuts in planned DRAM supply by major vendors have set the industry up for a possible shortage," he said. "If this happens, it will mean a return to profits for vendors and strong revenue growth."

However, the anticipated balance between supply and demand could easily swing into oversupply if DRAM manufacturers increase production top early, he added. "Any move into oversupply and the related build-up in inventory levels will have a knock-on effect on pricing. If ASPs deteriorated seriously, revenue and profits would quickly evaporate," he warned. ®

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