How AI data center boom is threatening auto supply chains
What's the story
The automotive industry is facing a new threat to its supply chain, thanks to the rapid expansion of artificial intelligence (AI) data centers. The boom is driving up the price of memory chips, which could have a major impact on vehicle production. UBS analysts led by David Lesne have warned that this chip shortage could lead to more than 100% price hikes in some cases.
Production impact
Chip shortage could disrupt global vehicle production
Lesne has warned that the disruption caused by this chip shortage could start as early as the second quarter of this year. He said, "We would not rule out some material downside risk" to global vehicle production. The specific type of semiconductors affected are dynamic random-access memory chips (DRAM), which automakers and their parts manufacturers use, though they depend on less-advanced versions compared to those used in AI servers and data centers.
Market shift
Demand for high-end memory chips surges
Both the automotive and data center industries rely on a limited supply of silicon wafers. However, with demand for high-end memory chips skyrocketing, the car industry needs to act quickly to strengthen its sourcing strategies. Matthew Beecham, a research analyst at S&P Global Mobility, has warned that "automakers face a narrowing window to redesign systems and lock in supply."
Industry focus
DRAM chip manufacturers prioritize data center market
S&P analysts have noted that the top three manufacturers of DRAM chips, Samsung Electronics, SK Hynix, and Micron Technology, are prioritizing the more lucrative data center market over automotive applications. This shift puts car manufacturers and suppliers who are heavily reliant on advanced driver-assistance systems and electronics components at a greater risk.
Vulnerable players
Companies most exposed to chip shortage
The UBS analysts have identified Visteon Corp. and Aumovio SE as the suppliers most at risk from this chip shortage. They also see more downside for Tesla and Rivian than Ford or General Motors. This comes after broad-based semiconductor shortages cost carmakers millions of vehicle outputs during the COVID-19 pandemic.