Memory chips oversupply issue get a relief after Qimonda filed for insolvency but the industry's recovery depends on a pick-up in demand, said the analyst.

"The Qimonda news is like rain after a long drought," said Jay Kim, an analyst at Hyundai Securities in Seoul.

Qimonda, ranked as the world's fifth-largest memory chip maker in the second quarter of 2008, filed for insolvency on Friday as a result of huge industry price drops and a credit squeeze.

"Qimonda has reached a limit. This will underscore the strength of makers in the relatively superior position, even in the weakening market," said Kim, who upgraded his rating on the world's top memory chip maker Samsung to "buy" from "market perform" on the news about Qimonda.

Elpida's shares were up 4 percent on Tuesday in a broader market rally, after jumping 6.4 percent on Monday, as some analysts pointed to near-term gains for the sector. The South Korean stock market resumes trading on Wednesday while the Taipei market resumes next Monday after holidays.

The sector has taken a beating. Since mid-2008, Samsung is down 29 percent, Hynix 72 percent and Elpida 84 percent while Taiwan's top DRAM maker Powerchip has dived 64 percent.

Last week, Samsung posted its first ever quarterly loss as its memory chip and display units buckled under the weight of diving prices, highlighting the pain faced by technology groups as consumer demand withers in an economic downturn.

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