Just as the automotive industry recovers from the semiconductor chip shortage caused by the 2020-21 pandemic, analysts are warning that another shortage is imminent.
Semiconductors have become essential for feature-rich new cars. Thousands of small computer chips are being installed – controlling everything from electric seats to advanced driver assistance systems (ADAS) that can autonomously brake and steer the car away from an obstacle if an impending collision is detected.
As reported last month, experts are now warning that a shortage of dynamic random access memory (DRAM) chips could hit the automotive sector as suppliers of the vital components of artificial intelligence (AI) data center manufacturing prioritize.
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According to a report published by S&P Global, high profit margins for hardware supplied to the AI industry exclude the automotive industry – even as semiconductor production increases in 2023 in response to the COVID-19 shortage.
An estimated 88 percent of the DRAM chips used in new cars are supplied by just three companies.
However, while previous shortages focused primarily on relatively primitive components, the looming supply issues relate to more advanced DRAM chips – potentially disproportionately impacting premium and technology-rich vehicles.
Given the limited supply of DRAM semiconductors and dramatically increasing demand, prices in 2026 could skyrocket by 70 to 100 percent compared to 2025 prices.
Given the number of semiconductor chips used in vehicles – and increasing regulations around mandatory safety technologies – this means that new car prices could rise significantly before the end of the decade.
Compounding the problem is that manufacturers are phasing out older chip types, even though these products are still widely used in automotive applications. This forces car manufacturers to switch to newer semiconductors, resulting in higher demand.
Although they are no longer manufactured for consumer electronics, S&P estimates that production of these older-generation chips for automakers will continue until 2027.
Because most of the ADAS technology used in new cars is based on these outdated semiconductors, automakers will be forced to upgrade their systems to the newer chips in just two years.
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