Automotive industry analysts are forecasting that another microchip shortage could hit in the coming months, which could increase risks for production halts as costs skyrocket.

The shortage would not be of general-purpose semiconductors, or microcontrollers, that caused plant shutdowns, low vehicle inventories, disabled features and higher prices in the wake of the COVID-19 pandemic. The problem instead lies with dynamic random-access memory, or DRAM (dee-ram), chips that support artificial intelligence, infotainment and advanced driver assistance systems (ADAS).

A boom in AI data center development has resulted in chip manufacturers prioritizing these high-bandwidth memory applications with high-margin opportunities from newer-generation chips, forcing consumer electronics companies and automakers to pay higher prices and scramble for supply.

"If you’re in on the automotive-consuming side of this equation," said Phil Amsrud, analyst for S&P Global Inc.'s automotive semiconductor research area, "your prices are going to go up and cash flow negatively will be impacted."

Two major things AI needs to operate are: lots of power and lots of memory. DRAM is the organ behind the memory storage in AI data centers.

A report from global wealth manager UBS Group AG found companies are reporting more than 100% price increases on DRAM chips. It predicts automakers will cover about 80% of the costs shared with suppliers, many of whom are increasingly under financial pressure from inflation, tariffs and other costs. Suppliers in electronics and ADAS are most at-risk.

"The prices have increased, because there is a lot of demand in general for the memory chips driven by AI," said David Lesne, UBS anlyst. "But then, if you look 12-24 months from now, the chips that the auto industry is using — which are a bit more basic and not necessarily so profitable for the memory chip suppliers — and we might be in a situation of more shortages."

Most vulnerable are premium auto brands and EV makers, including those in China, analysts said. Although vehicles had hundreds of the microcontrollers that were short a few years ago, DRAM represents about $25 to $150 of the content in a vehicle, according to UBS.

DRAM chips especially are important for users of automotive system-on-a-chip, or SoC, technology that combines computing functions like ADAS, infotainment and vehicle control onto a single chip. SoC is the main enabler of zonal electrical architectures in vehicles that automakers likes Tesla Inc., Rivian Automotive Inc. and some Chinese manufacturers use to unlock increasingly software-defined vehicles, lower costs and improve over-the-air updates.

"Those guys can't build cars without DRAMs," Amsrud said. "It's one of the few times in my recent memory where being a traditional automaker might actually have a little bit of an advantage."

If needed, they could remove certain content or features, though automakers like Ford Motor Co. and General Motors Co. also are working on rolling out vehicles with central computing electrical architectures as well.

There are multiple kinds of DRAM. The auto industry primarily has used DDR4 and LPDDR4 — the fourth-generation low-power double data rate. The fifth generation, however, mostly is what AI uses with higher memory capacity and greater efficiency. The technology also provides higher profits for chip fabricators. As a result, they are prioritizing capacity for those applications.

Unlike the microcontroller shortage, there is sufficient production capacity for DRAM for now, experts said. But smartphones and tablets represent about 35% of global DRAM revenue, computers are 25% and servers and data centers are about 20%, according to UBS. Automotive makes up a lower single-digits percentage, resulting in lower prioritization.

"There may be adequate worldwide capacity," Amsrud said, "but what the memory guys are doing is they'll take that same unit of capacity and say, 'I can build high-bandwidth memory for servers, and I’ll make this much money on that, or I can make for automotive and make a lot less with that same unit of capacity.' If you want it, you can get it, but you'll have to pay for it."

Long-term, he noted, automakers may have to turn to DDR5 to ensure secure supply as chip fabricators shift capacity to the more advanced versions.

GM last month shared that it expects that DRAM, unfavorable foreign exchange changes and higher prices on materials like copper and aluminum as a result of tariffs will increase costs by $1 billion to $1.5 billion this year.

"As of now, we don't see any issues that are going to impact our ability to produce," GM CEO Mary Barra said during an earnings call. "You've seen us over the last couple of years, even going back to the semiconductor shortage, how the team works and gets ahead of these. And so that's obviously ongoing work the team is doing."

Ford Chief Financial Officer Sherry House on an earnings call this month said higher commodity prices from DRAM and inflation are expected to total about $1 billion more in costs in 2026, but the Dearborn automaker expects material and warranty cost reduction will offset the increase.

"This is something that we've been actively managing," House said at the Wolfe Research Auto, Auto Tech and Semiconductor Conference. "We do believe at this point in time that we have access to sufficient supply, but we are seeing pressure on pricing, and that has gone into our forward plan."

Chrysler and Jeep maker Stellantis NV will report full-year financial results on Thursday. The company is actively monitoring the situation and working to develop mitigation strategizes to minimize potential disruption, spokesperson Jodi Tinson said in a statement.

Under the microcontroller shortage, tensions with China and chip production centered in Taiwan contributed to supply challenges. Meanwhile, three suppliers represent more than 90% of DRAM production: South Korea's Samsung and SK Hynix Inc. and Idaho-based Micron Technology Inc., offering some regional supply amid trade negotiations.

Micron is forecasting a more-than-fourfold increase year-over-year in earnings per share in the second quarter alone. After a record 2025, SK Hynix says its entire 2026 production already is sold out in what it's dubbed a "supercycle."

Van Buren Township-based digital cockpit electronics supplier Visteon Corp. said last week it identified 50% year-over-year growth in the memory chip business late last year compared to the usual 10%. In addition to working with the big three DRAM suppliers, it's looking at drop-in replacements and also has secured supply from emerging manufacturers in China. It's looking to customers to cover the increasing prices.

"If I look at our full-year demand for this year, we should largely be able to cover customer demand," Visteon CEO Sachin Lawande said on an earnings call. "There may be some timing impacts that we have to manage. Even that, I think as we work with our suppliers, we should be able to largely mitigate."

Adding to automotive's challenges is the unpredictability around consumer demand, particularly of EVs. Automakers looking to secure supply may pay upfront to lock it in, Amsrud said. But EV sales have missed expectations because of affordability challenges, insufficient charge infrastructure and the end of the federal plug-in tax credit in the United States, and manufacturers don't want to overpay.

"If you worst-case this, and what we saw from the pandemic was pretty close to worst-case, it shouldn’t be that bad," Amsrud said. "It’s not going to be industrywide where everyone can get nothing, and everybody is waiting on something to do.

"Right now, we're somewhat reading the tea leaves," he said. "There's a reasonable risk it's (a shortage) going to happen."

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