The automotive industry is bracing for a new microchip shortage that could disrupt production and add $1 billion or more in costs to major automakers, as AI data center development diverts critical DRAM chip supply away from vehicles, according to industry analysts and company warnings issued February 21.
Unlike the general semiconductor shortage during the COVID-19 pandemic, this crisis centers specifically on dynamic random-access memory (DRAM) chips essential for AI-powered infotainment systems, advanced driver assistance systems (ADAS), and the centralized computing architectures that enable software-defined vehicles. Chipmakers are prioritizing high-bandwidth memory for AI data centers over automotive applications, forcing automakers to scramble for supply and pay dramatically higher prices.
S&P Global forecasts DRAM prices could rise 70% to 100% year-over-year in 2026 for new automotive contracts, with some suppliers already reporting price increases exceeding 100%. SK Hynix announced its entire 2026 production is already sold out in what the company calls a "supercycle," while Micron Technology called the supply bottleneck "unprecedented."
AI Infrastructure Starves Traditional Markets
Approximately 70% of memory chips manufactured in 2026 will be destined for AI data centers, according to industry estimates, as hyperscalers like Amazon, Microsoft, Meta, and Google build massive AI infrastructure requiring enormous memory allotments. This leaves consumer electronics companies and automakers competing for the remaining 30% of supply while chipmakers phase out older DRAM technologies still commonly used in automotive applications.
The three companies controlling over 90% of the global DRAM market—SK Hynix, Samsung Electronics, and Micron Technology—are converting production lines from automotive-grade memory to high-bandwidth memory (HBM) for AI chips, which offer significantly higher profit margins. Micron has already halted production of standard PC memory to focus exclusively on AI memory lines.
General Motors disclosed last month that DRAM costs, unfavorable foreign exchange, and higher commodity prices will increase costs by $1 billion to $1.5 billion in 2026. Ford CFO Sherry House similarly warned that higher DRAM prices and inflation would total approximately $1 billion in additional costs, though the automaker expects material and warranty cost reductions to offset the increase.
Panic Buying and Production Risks
"This shift has already sparked panic among OEMs and tier 1 suppliers, reminiscent of the rush to secure components during the 2021 crisis," S&P Global stated in its analysis. Auto suppliers including Van Buren Township-based Visteon reported 50% year-over-year growth in memory chip costs late last year compared to typical 10% increases.
DRAM chips are particularly critical for automotive system-on-a-chip (SoC) technology that combines computing functions like ADAS, infotainment, and vehicle control onto a single chip. This architecture enables the zonal electrical systems that companies like Tesla, Rivian, and Chinese manufacturers use for software-defined vehicles, over-the-air updates, and cost reduction.
"Those guys can't build cars without DRAMs," said Phil Amsrud, analyst for S&P Global's automotive semiconductor research team. Tesla CEO Elon Musk acknowledged the severity by declaring the company would build its own memory fabrication plant to ensure supply.
Long-Term Structural Challenges
The crisis extends beyond immediate pricing pressure. Chipmakers plan to phase out legacy DRAM technologies by 2028, forcing automakers to redesign and validate systems around newer memory standards—a time-consuming and costly process that could take years to complete.
GM CEO Mary Barra maintained the automaker doesn't currently foresee production impacts, citing the company's experience managing supply chain disruptions. However, S&P Global warned that "anecdotal disruption to car production triggered mostly by panic buying" remains a risk even if automakers pay premium prices to secure supply.
The automotive sector accounts for less than 10% of the global DRAM market, leaving automakers with limited economic bargaining power compared to hyperscalers deploying AI infrastructure at unprecedented scale. This structural disadvantage means automotive will likely face persistent supply constraints and elevated pricing until chipmakers significantly expand total production capacity—a process that could take years.
