The now-Stoke City frontman broke into the Liverpool starting lineup as a 17-year-old back in 1997 and soon after became a key member of the squad.
However, Ferguson feels that the Reds should have given the former England international more time to develop.
"You can play too much football, particularly young players growing and developing physically," he told reporters. "That's exactly what happened with Michael. He would've been a far better player if he'd been allowed to improve technically and develop rather than playing all the time.
"When the England youth team played in that tournament in Malaysia we had two players in the tournament at the same time, John Curtis and Ronnie Wallwork.
"We gave them a month's rest after they came back from the tournament but Liverpool put Owen right back in the first team. And then the following season he played in the World Cup so he never had a summer break.
"I don't think he was allowed to develop technically, as he himself said to me when I discussed it with him. It's maybe a bit churlish to say that's the reason he wasn't better. I think he would have been better technically but he was still a fantastic player."
Owen spent three years as a Man United player up until the end of last season.