The car industry thought it had already experienced the worst of times regarding semiconductor chips after the crisis of 2021, which made the production of 10 million cars stall. However, the worst is about to come in terms of chip shortage, although it will target the luxury car segment in a unique way.
Memory chip makers are turning away from automotive design to capitalize on the gold rush surrounding artificial intelligence, creating a supply crisis that could radically impact the design of future models for car manufacturers.
To blame is the dynamic random access memory chip, or DRAM for short, the unsung hero that drives everything from touch screens to autonomous systems.
AI Demands Squeeze Automotive DRAM Supply
Three companies dominate the global DRAM market: Samsung Electronics, SK Hynix, and Micron Technology, which control 88% of the automotive memory chip supply. These giants are increasingly redirecting their manufacturing capacity toward high-bandwidth memory for AI data centers, where profit margins dwarf what they can earn from car manufacturers.
The economics are simple and stark. Since ChatGPT sparked an AI frenzy, data centers packed with Nvidia GPUs have become insatiable consumers of specialized memory chips. Each GPU module needs high-bandwidth memory that consumes far more manufacturing space than standard automotive DRAM, and companies will pay premium prices to get it.
“The margins for DRAM in data centers are significantly higher than those for automotive applications,” industry analysts note. When faced with this reality, chip makers are making rational business decisions that happen to create headaches for automakers.
Why This Matters for Your Next Car
Modern vehicles are becoming computers on wheels, especially at the premium end of the market. While basic cars might get by with modest memory requirements, high-end models pack sophisticated infotainment systems, advanced driver assistance features, and over-the-air update capabilities that all demand serious DRAM firepower.
The value difference is dramatic. Entry-level vehicles might contain less than $25 worth of DRAM chips, but luxury models with cutting-edge technology can carry over $150 in memory components. These are exactly the vehicles that will feel the pinch as supply tightens.
Adding complexity, the previous semiconductor shortage primarily affected analog components and microcontrollers. This time, the shortage centers on memory chips that aren’t easily swappable between different vehicle systems. You can’t simply grab DRAM from one application and plug it into another.
Carmakers Face 100% Price Hikes for Legacy Memory
Experts forecast that such a shortage is expected to occur in a number of stages.
During 2026 and 2027, the availability of DRAM will remain present but will come with a heavy price tag. This has been made clear by manufacturers: Memory such as DDR4 and LPDDR4 will remain in production for autos by the end of 2027, in addition to being phased out for other applications.
Notwithstanding, if carmakers are prepared to set comparable prices that memory suppliers are able to charge others, they are anticipated to pay 70% to 100% more than in 2025.
This comes as a shock to premium carmakers who are already loaded with more than $150 worth of DRAM charges today, as it is anticipated to impact their margins quite seriously. Nonetheless, they are expected to cope with it in much the same way as they adjusted to tariffs imposed by US earlier in 2026.
The bigger worry during this phase is panic buying creating artificial shortages, similar to what happened in 2021 when everyone scrambled to stockpile chips.
Navigating the Structural Shortage of Automotive Memory
The situation becomes truly critical starting in 2028 when older DRAM generations effectively disappear from the market, regardless of price. Most vehicles planned for production that year rely on cockpit and driver assistance designs built around DDR4 and LPDDR4 memory that won’t be available anymore.
The majority of the top cockpit designs and eight out of ten leading driver assistance systems forecast for 2028 use these soon-to-be-extinct memory types. The industry has roughly two years to redesign these systems around newer LPDDR5 memory that will remain in production.
Two years sounds like enough time, but it requires coordinated action across the entire supply chain. Processor suppliers, tier-one component manufacturers, and automakers must all move quickly and in sync to avoid production disruptions.
Unlike previous shortages where companies could build buffer inventories or find alternative suppliers, this crisis stems from structural shifts in the semiconductor industry. Building new chip fabrication plants takes years, and investment surges that began in 2023 won’t provide relief anytime soon.
The automotive sector must accept that AI’s explosive growth has permanently changed the priority list for memory chip manufacturers. Strategic planning and rapid technology transitions are now essential survival skills as the car industry adapts to playing second fiddle to the data center boom.
