Prices for 512Mb DDR and 1Gb DDR2 chips are set to rally as supply fails to meet demand recently, according to industry sources. Rising demand coming from the consumer electronics sector, coupled with chipmakers' ongoing production cutbacks earlier, has led to the tight supply, the sources indicated. Prices will likely be pushed up as a result of shortages, the sources said.

The market for specialty DRAM had been flooded during 2011 dragging down prices significantly, the sources indicated. Oversupply was caused by more output from Taiwan-based firms, which intended to reduce production of commodity DRAMs due to a shrinking PC market, coupled with weakening demand, the sources observed.

However, end-market demand has rebounded gradually, tightening the supply for specialty DRAM chips, in particular for 512Mb DDR parts used mainly in TV, set-top box and networking applications, the sources pointed out. The shortage is likely to persist through March, the sources added.

The shortage of 1Gb DDR2 chips is more related to supply issues, the sources said, adding that some of the major firms tend to scale down or discontinue their supplies for the memory.

Hynix Semiconductor currently is the world's largest supplier of specialty DRAM memory, the sources noted. Other players include Nanya Technology and Winbond Electronics, and fabless firms Etron Technology and Elite Semiconductor Memory Technology (ESMT).