Although there was an actual decline quarter on quarter of 8.2 percent the slow down in the rate of inventory sell-off was due primarily to the continued chip pricing pressures that have seen ASP's remain low. DRAM prices have also fallen considerably in the last two quarters, which is also dragging down overall sales growth rates for the industry this year.

Days of Inventory are flat, to slightly up, according to isuppli, with the vast majority of inventory being held by the chip manufacturers themselves. Only a few months ago, Steve Appleton, Micon's head honcho told a group of financial analysts in London that the company would stock-pile DRAM during a period of poor prices and only start selling the excess when prices improved.

Xilinx, for example has been suffering from high DOI since last year and has reduced inventory quarter on quarter this year but only by days, rather than weeks. We believe most of the reductions achieved have been at the expense of foundry partners such as UMC, which has lagged its main rival TSMC in the capacity utilisation and 300mm wafer-starts stakes in the last couple of quarters.

However, isuppli seems to think that a second half increase in IC demand, especially for memory products will see inventory levels continue to decline in 2005 but the market research firm cautioned that inventory levels within the supply-chain would not return to preferred levels until mid-2006.