Anticipated chip undersupply would most affect advanced driver-assistance and autonomous driving systems and cockpit systems that rely heavily on computations, especially in higher-end models.
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The fast-growing development and use of artificial intelligence is poised to bring another chip shortage to the automotive industry after it had put pandemic-era deficits behind it.
A recent report by S&P Global predicts the industry will experience scarcity of dynamic random access memory, or DRAM, chips this year. Though the data analyst said the shortfall shouldn’t rival that of the Covid period, it’s likely to exceed problems seen during last year’s Nexperia disruptions.
S&P said the anticipated undersupply would most affect advanced driver-assistance and autonomous driving systems and cockpit systems that rely heavily on computations, which also underpin AI. DRAM makers have shifted more capacity toward high bandwidth memory for AI centers, whose demand and profitability greatly outweigh automotive uses, S&P reported.
Chip shortages can have dramatic effects on the supply of new vehicles. Pandemic-era chip deficits cut automotive production by more than 10 million units in 2021 alone, S&P said.
Last fall, a smaller disruption occurred during a dispute between chip supplier Nexperia and its partially state-owned Chinese parent during which the Dutch government temporarily took control of the company. Some automakers, including Honda and some Europe-based brands, experienced chip shortages.
Demand for AI after the release of the ChatGPT chatbot in late 2022 has driven increasing development of data centers and the chips that support them.
“DRAM manufacturers did not foresee this explosion in demand, and there is now a deficit of capacity for DRAM wafer fabrication,” S&P said. “While new investments in capacity have surged since 2023, is still takes years to build a new wafer fab.”
DRAM makers are also phasing out older chip technologies still commonly used for automotive applications by the end of next year, though autos, especially high-end models, are increasingly reliant on DRAM chips. Automakers will therefore need to redesign chip-reliant systems, the analyst reported.
“This shift has already sparked panic among OEMs and tier 1 suppliers, reminiscent of the rush to secure components during the 2021 crisis,” said S&P, which recommended automakers build “buffer” chip supplies, though that would offer “limited long-term relief.”
Meanwhile, automakers that pay more to match prices DRAM makers get from the AI industry should be able to get enough supply for their needs. In the case of new supply contracts, DRAM prices could be up 70% to 100% year-over-year in 2026.
S&P expects the auto industry will be able to swallow increased costs, but, “We could also see some anecdotal disruption to car production triggered mostly by panic buying however. Indeed the DRAM shelves are currently being emptied and an artificial shortage may occur.”