Global prices for DRAM memory chips are expected to fall 10 per cent from current levels by the end of the third quarter, a report said.

Technology research firm iSuppli warned that higher-than-expected shipments in the second quarter signalled that manufacturers had built up excess inventory, and global economic conditions added further uncertainty as to future demand.

The chips are used mainly in personal computers.

"The market is showing renewed warning signs," iSuppli said in a statement, keeping its "neutral" rating for DRAM market conditions but saying it would continue to watch near-term developments to determine if an update was required.

Cuts in capital expenditure by struggling chipmakers should in time help balance supply and demand, supporting prices, iSuppli said.

But it cautioned that increases in production by top memory chip makers Samsung and Hynix, as they migrate aggressively to smaller manufacturing structures, meant a market recovery may come only in the second half of 2009.

ISuppli added that makers of NAND flash memory, used in consumer goods such as cellphones and digital cameras, seemed to have been adjusting to oversupply conditions and scaling back production, meaning prices should recover in the fourth quarter. - Reuters