Automakers Face Chip Shortage Due to Demand From AI Data Centers

Automakers and their suppliers are reportedly facing shortages of memory chips due to competition from companies building artificial intelligence data centers.

Because the data center market is more profitable for chipmakers, the auto industry has seen the prices it pays for chips more than double, in some cases, Bloomberg reported Tuesday (Jan. 20), citing recent reports by analysts from UBS and S&P Global Mobility.

Changes in chip production and distribution have caused some disruptions in auto production, and those sorts of challenges could increase in the second quarter, according to the Bloomberg report.

Matthew Beecham, a research analyst for S&P Global Mobility’s AutoTechInsight platform, wrote in a Jan. 8 blog post that the chip shortage requires automakers to build agile sourcing strategies and deep supplier relationships.

“This automotive semiconductor shortage could cause automotive-grade [dynamic random-access memory (DRAM)] prices to spike 70% to 100%, triggering panic buying and production disruptions across the industry,” Beecham wrote.

It was reported Jan. 7 that Samsung said a chip shortage could drive up prices across the electronic sector, affecting everything from smartphones and laptops to home appliances and self-driving cars.

“There’s going to be issues around semiconductor supplies, and it’s going to affect everyone,” Wonjin Lee, president and head of global marketing at Samsung, said at the time. “Prices are going up even as we speak. Obviously, we don’t want to convey that burden to the consumers, but we’re going to be at a point where we have to actually consider repricing our products.”

The report attributed the shortage to record demand for high-bandwidth memory caused by the boom in AI data center construction.

Bain and Company said in a 2024 report that surging demand for AI-focused chips and AI-enabled devices could outstrip supply, leading to a new global semiconductor shortage.

It was reported in May that tech companies’ data center projects could require more than $1.8 trillion in funding by the end of the decade.

The auto industry faced an earlier chip shortage caused by the pandemic, which lasted into 2023. That shortage contributed to declines in retail sales of new and used vehicles.

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