UBS: AI data centres could trigger OEM chip supply shock

UBS has warned that memory chip shortages driven by the rapid expansion of AI data centres could disrupt global automotive production as early as Q2, with per-unit price hikes already exceeding 100% in some cases. In a note to investors, Analyst David Lesne stated the bank “would not rule out some material downside risk” to vehicle manufacturing due to the surging demand for high-end chips straining silicon wafer supplies shared between both industries.

The bottleneck centres on dynamic RAM (DRAM) chips, which automakers typically purchase in older, less-advanced specifications than those powering AI servers. The top three DRAM producers—Samsung Electronics, SK Hynix and Micron Technology, respectively—are all prioritising the more profitable data centre segment over automotive applications. 

S&P Global Mobility Research Analyst Matthew Beecham wrote in an 8 January report that “automakers face a narrowing window to redesign systems and lock in supply” as wafer fabs shift their production capacity towards higher-margin AI infrastructure. The memory shortage threatens to force automakers into lengthy negotiations with tier 1 suppliers over price recovery while competing against technology companies for limited capacity.

Among the suppliers UBS identified as being at heightened risk were those with a larger exposure to autonomous driving systems and electronic components. The analysts highlighted Visteon and Aumovio as being particularly exposed among suppliers, while projecting more downside for newer, more tech-forward players like Tesla and Rivian than legacy OEMs like Ford or General Motors. 

The warning echoes the pandemic-era semiconductor crisis that cost automakers output of millions of vehicles when automakers cancelled their chip orders anticipating a recession and prolonged weakening of demand. Instead, car sales rebounded faster than expected leaving them substantially short. Chipmakers had pivoted their capacity towards consumer electronics during factory closures, leaving automakers at the back of 20-to-52-week waiting lists when production resumed. 

The crisis, compounded by factory fires, extreme weather and geopolitical tensions, eliminated an estimated 11 million vehicles from 2021 global production plans and generated over US$210bn in lost industry revenue.