Automakers lose chip war to AI as memory costs double

Carmakers are staring down another parts problem. The craze to build AI data centers is squeezing supplies of memory chips that vehicles depend on.

Memory chip costs have more than doubled, UBS analysts said Tuesday, as reported by Bloomberg. David Lesne’s report warned that disruptions could kick off in the second quarter and hurt global car production.

The trouble centers on DRAM chips, dynamic random access memory. Cars use simpler, older versions than AI servers do, but both fight over the same silicon wafers. Supply can’t keep up. Automakers need to hurry and nail down their sources.

Matthew Beecham at S&P Global Mobility put it bluntly in a January 8 report. Automakers don’t have much time to redo their systems and lock down supply. The big three chipmakers, Samsung Electronics Co., SK Hynix Inc., and Micron Technology Inc., are picking data centers over cars because that’s where the money is.

UBS flagged who’s in trouble. Suppliers Visteon Corp. and Aumovio SE look shaky. Tesla Inc. and Rivian Automotive Inc. seem more exposed than Ford Motor Co. or General Motors Co., mainly because they lean harder on electronics and driver aids.

This isn’t new territory. COVID-19 chip shortages kept millions of cars from getting made. Honda Motor Co. just had to pause some lines because of headaches with Nexperia BV, a chipmaker, a Dutch court yanked away from Chinese owners.

Factories can’t crank out enough wafers. New ones started going up in 2023, but they take years to complete. Data center chips pull in far better margins than automotive ones. Samsung, SK Hynix, and Micron are chasing the bigger paydays.

There’s another wrinkle. These three are killing off older tech like DDR4 and LPDDR4. Cars still run on these. It’s got automakers and suppliers spooked, much like the 2021 panic.

Today’s cars keep demanding more DRAM. Basic models use modest amounts. High-end rides with fancy dashboards and semi-autonomous features need loads more for infotainment, sensor data, and wireless updates. Electric and gas vehicles both follow this trend, with luxury models pushing demand higher.

The dollar figures paint the picture

A stripped-down economy car holds about $24 in DRAM. A tech-packed luxury model might pack over $150. Premium vehicles need substantially more to power their advanced gear. S&P Global Mobility sees two stages coming. In 2026 and 2027, chips will be around if carmakers cough up more cash. Makers pledged to keep DDR4 and LPDDR4 rolling for automotive through the end of 2027, even while stopping consumer production. But prices could jump 70 to 100 percent from 2025 levels.

That’s rough for premium cars that already had north of $150 in DRAM last year. Even basic A-segment vehicles averaged around $24. Automakers won’t like it, but they absorbed similar hits from US tariffs in 2026. Overall production probably won’t grind to a halt, though some plants might close briefly as companies hoard chips out of fear.

The real pain hits in 2028

Beyond that, old DRAM types vanish regardless of price. Most cars slated for 2028 still use designs needing DDR4 and LPDDR4 in dashboards and safety systems. Those chips won’t exist.

Right now, the top 10 dashboard setups and 8 of the leading driver assistance setups planned for 2028 rely on DDR4 and LPDDR4. The industry’s got two years to switch everything to LPDDR5, which factories will keep making. Sounds doable, but chip designers, parts makers, and automakers all need to hustle.

Three outfits control 88 percent of the car DRAM supply. There’s no fast answer to the capacity crunch. Automakers have to roll with AI data center expansion while safeguarding their chip pipelines.

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