Global chip inventories are expected to have fallen to $2.9 billion at the end of the first quarter from $3.4 billion at end-December, but the drop is a reflection of supply cutbacks, not strong demand, iSuppli said.
“An expected, decline in surplus stockpiles is revealing troubling signs of market weakness,” the technology research firm said in a report released on Tuesday.
Equity investors in semiconductor companies, especially makers of DRAM memory chips used in personal computers, have been cheered in recent days by what they have seen as signs of the beginning of the end of a severe industry slump.
After DRAM prices collapsed in 2007 due to oversupply, memory chipmakers Elpida and Samsung said this week they hoped to have the negotiating power to raise prices this month.
iSuppli said it expected that DRAM prices had continued their slide through March and would bottom this quarter.
The research firm said it expected suppliers of NAND-type flash memory in particular, used in consumer devices such as cameras and music players, to miss their first-quarter forecasts amid lower-than-expected demand.
It said iPod and iPhone maker Apple (NASDAQ: AAPL) had cut its expected NAND order levels for this year.
Korea’s Hynix said earlier it was reducing its NAND output, citing weak market conditions.
iSuppli said makers of personal computers had reduced orders early in the year and that current orders were lower than typical, although it had not seen cancellations.
The situation has been eased slightly by a slowdown in a price war between computer microprocessor makers Intel (NASDAQ: INTC) and AMD (NYSE: AMD), removing some uncertainty from the market, iSuppli said.
Separately, DRAM price tracker DRAMeXchange warned that DRAM suppliers seeking to exploit the current depression to expand their market share by increasing supply risked making matters worse for the whole industry.
“DRAMeXchange believes a better pricing environment will only be possible if these suppliers slow down further expansion and adjust capacity, or everyone loses,” it said.