Is the "DRAM storm" sweeping into the automotive industry?
According to Wind Pursuit Trading Desk, UBS’s latest global automotive industry research report shows that a supply chain shock triggered by DRAM (Dynamic Random Access Memory) chips is looming over the automotive industry. As global wafer capacity is tilted toward high-performance chips due to the explosive growth of generative AI, automotive-grade memory chips are facing a dual squeeze of surging prices and supply shortages. The negative impact is expected to become apparent starting from the second quarter of 2026.
UBS points out that the global top three DRAM suppliers—Samsung, SK Hynix, and Micron—are shifting their production focus to high-bandwidth memory (HBM) needed for AI servers in pursuit of higher profits. This strategic adjustment directly squeezes the supply space for automotive-grade DDR memory. At the time the report was published, DRAM chip prices had already risen by more than 100%, and this upward trend is expected to spread to automotive-grade products, causing the industry to face a severe supply vacuum during the technology transition period.
UBS’s model shows that under the pressure of a sharp rise in DRAM prices and the inability to fully pass on costs, the profitability of parts suppliers will be significantly impacted. In the baseline scenario (DRAM chip price increases by 120%, OEM cost recovery ratio at 80%), UBS estimates that automotive parts suppliers’ EBIT will decline by 5%-6% in 2026. In a more pessimistic extreme scenario—DRAM price hikes expanding to 200% and OEM cost recovery falling to 50%—EBIT decline would soar to 24%, with profit shrinkage reaching €480 million, close to half of its original EBIT scale.
For automakers, the impact is characterized by delay and structural features. Although there are currently no signs of supply interruptions, supply chain stability in the next 12-24 months is worrying. In particular, high-end brands and emerging automakers with centralized computing architectures will face greater risk of cost fluctuation due to higher DRAM content per vehicle.
Production Capacity Squeeze and Technology Discontinuity
The core reason behind this crisis is the redistribution of global semiconductor resources and mismatch in technological iteration cycles.
Starting from 2025, the demand for HBM in AI servers will soar, prompting the top three suppliers who hold more than 90% of the global market share to reallocate wafer resources. Because automotive-grade DRAM and AI chips share global silicon wafer capacity, each wafer allocated to HBM means a reduction in the production capacity for automotive DDR memory.
Meanwhile, the auto industry is transitioning from older technologies like DDR4 and LPDDR4 to the new DDR5 standard. Suppliers are gradually phasing out old tech capacities, but it usually takes automakers more than two years to complete testing, validation, and procurement of new chips. This means that between 2026 and 2027, the automotive industry will face a “technology gap” with shrinking supply of old chips and the new chips not yet widespread.
EBIT May Face Double-Digit Decline
The core focus of UBS’s evaluation is the profitability impact on parts suppliers.
Taking Europe as an example, UBS constructed a financial model to quantify the specific impact of DRAM price hikes on parts suppliers. A benchmark sample of a generic parts supplier with annual sales of €20 billion and an EBIT margin of 5% was selected.
In the baseline scenario, assuming DRAM chip prices rise 120% and suppliers are able to pass through 80% of the increased costs to automakers (OEMs), the company's EBIT in 2026 is expected to decline by about 5%-6%, with profit shrinking by about €100-120 million. However, in a more pessimistic scenario where DRAM price hikes expand to 200% and cost recovery falls to 50%, EBIT decline would surge to 24%, and profit shrinkage could reach €480 million, nearly half its original EBIT.
This calculation shows that the profit cushion for parts suppliers is thinning. UBS emphasizes that companies with higher shares of electronics and ADAS (Advanced Driver Assistance Systems) business have greater risk exposure. In the European and U.S. markets, Visteon and Aumovio (formerly Continental’s automotive business) have more than 50% of their business in these sectors, making them the most directly impacted companies by the DRAM storm.
Structural Risks for Automakers
For automakers (OEMs), the proportion of DRAM costs in the total vehicle price is not high, but as intelligence increases, DRAM content per car has reached $25-150, and even higher for high-end models. UBS notes that companies like Tesla and RIVN, which use centralized computing architectures, have a particularly large demand for memory capacity in advanced driver assistance and intelligent cockpit systems, and will be especially affected.
Although there are no signs yet of large-scale supply instability or price renegotiations, UBS warns that the auto industry lacks an advantage when competing with financially powerful tech giants for DRAM capacity. In the long term, the cost pressures from rising prices could lead to lengthy retroactive compensation negotiations, further exacerbating automakers' financial volatility.
As for coping strategies, UBS believes current inventories and long-term procurement contracts can only provide short-term buffering, and long-term solutions will depend on product redesigns after 2028. Market data shows that global DRAM industry revenue in 2026 is expected to increase by 148.4% year-on-year to $36.6 billion. The supply-demand gap will persist, and average price per Gb of DDR memory is expected to reach $0.92.
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