Toshiba, the world's sixth-largest chip maker, cut its operating profit target for the year to March by 16 percent to 160 billion yen ($1.54 billion), following similar moves by other tech firms such as Sony Corp and Fujitsu Ltd.
The new forecast is below a consensus projection of 189.2 billion yen in a poll of 16 analysts by Reuters Estimates and also represents a drop from the 174.6 billion yen profit in the previous year.
"A downward revision does not surprise us anymore. Most electronics makers and components manufacturers fell victim to digital electronics-related inventory adjustments," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
"A recovery can be expected in April-June or July-September. Inventory trimming should have run its course by then."
Toshiba, Japan's second-largest electronics conglomerate, posted an operating profit of 930 million yen in the third quarter ended December 31, down from 14.03 billion yen in the same period a year earlier. Net profit was 1.57 billion yen, compared with a 9.25 billion yen loss a year earlier.
Toshiba is the world's biggest supplier of digital electronics-use microchips, followed by Sony and Matsushita Electric Industrial Co Ltd, maker of Panasonic brand products, according to research firm iSuppli.
Sony earlier this month cut its full-year operating profit estimate by 31 percent because of sharply falling prices of TVs, DVD recorders and other key products and weak demand for chips, setting the tone for the ongoing quarterly earnings period.
Toshiba makes system chips - high-end microchips that combine multiple functions on one piece of silicon - as well as NAND-type flash memory, Toshiba's cash cow product popular in digital cameras and photo-snapping phones.
"We had braced ourselves for a severe business environment for system chips given inventory adjustments for digital electronics. But price falls in NAND flash memory have turned out sharper than expected," Toshiba Corporate Executive Vice President Sadazumi Ryu told reporters.
NAND flash memory prices came under pressure last year as new entrants such as Hynix Semiconductor Inc sparked fierce competition.