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"Although the DRAM suppliers themselves are still carrying more inventory than normal, stockpiles in the channel have been reduced significantly," said Nam Hyung Kim, chief analyst at iSuppli. "Furthermore, OEMs including the PC makers now are at optimal DRAM inventory levels, meaning their orders will increase during the critical third-quarter holiday build season."

The market research group suggests the average megabyte DRAM selling price has fallen by 17 percent in the first quarter of 2008, after a 31 percent decline in the fourth quarter of 2007. While still an above-average decline in the first quarter, the slower rate of decrease indicates the market now is bottoming out, iSuppli added.

Per-megabyte DRAM prices will rise by 2 percent during the second quarter, iSuppli projects.

The inventory/sales ratio for DRAM suppliers is put at about 0.7 to 0.8 , meaning that their stockpiles are equivalent to 70 to 80 percent of their sales This is far above the healthy range of 0.4 to 0.5.

DRAM suppliers early this year said they plan to cut their capital spending on production capacity by about 40 percent in 2008 compared to 2007. But Kin suggests that due to a lack of profitability and diminishing cash reserves over the past several months, many suppliers won't be able to afford spending even at such a reduced level, and may slash their capital outlays by an even greater margin this year.