Introduction | Lead

For domestic automakers, the chip shortages of previous years remain a vivid memory. Now, signs of memory chip shortages are re-emerging, potentially posing a new challenge for automakers in their supply chains.

This article is produced by | Heyan Yueche Studio

Written by | Zhang Dachuan

Edited by | He Zi

Full text: 2244 words

Estimated reading time: 4 minutes

Signs of a memory chip shortage are already evident, with supply-demand dynamics causing price fluctuations.

Lei Jun, Chairman of Xiaomi Automobile, mentioned in a livestream in January this year that memory prices are rising quarterly, with prices increasing by 40%-50% in the last quarter alone. This upward trend is expected to persist in the first quarter of this year. Prior to this, Meng Qingpeng, Vice President of Supply Chain at Li Auto, and Li Bin, Founder of NIO, also highlighted the pressure of rising memory chip prices on their companies.

Data indicates that starting from the second half of 2025, prices of mainstream storage chips such as DDR4 and DDR5 have cumulatively risen by 2-3 times. By early 2026, memory chip prices have accelerated their rise, with some spot quotes surging threefold compared to the same period last year.

Why are memory chips in short supply?

For automakers, there are two primary reasons for the imbalance in the supply and demand of memory chips:

On one hand, the level of vehicle intelligence is increasing. According to data from the China Academy of Information and Communications Technology, the storage demand for a single high-end intelligent vehicle has reached 64GB-256GB and is moving towards the terabyte (TB) level. This has significantly increased the demand for memory chips by automakers.

On the other hand, the rapid development of artificial intelligence (AI) technology has led to an explosive growth in the demand for high-performance memory chips by global data centers. What is even more concerning for automakers is that the profit margins of memory chips needed by data centers are much higher than those of traditional DRAM products used in the automotive industry. Additionally, the automotive industry accounts for less than 10% of the global DRAM market, leaving automakers with little bargaining power in the competition for memory with AI giants.

It is worth noting that companies like Micron and Samsung will prioritize supplying about two-thirds of their high-end DRAM production capacity to AI customers and will gradually phase out old-process chips like DDR4, which are widely used by automotive manufacturers. Consequently, the supply of the memory chips most in demand by automakers will be somewhat constrained. At the same time, unlike scenarios in consumer electronics and data centers, automotive chips require a longer and more stringent certification process. Therefore, whether memory chip companies expand production or automakers switch to domestic alternative solutions, a relatively long cycle is required. Thus, it is foreseeable that automakers will find it difficult to mitigate the challenges and pressures brought by memory chips in terms of supply and cost in the future.

Automotive companies are caught in a pincer attack

Currently, many automakers are experiencing a pincer attack, with challenges from memory chips on one side and a downturn in whole vehicle sales on the other.

At the terminal demand end, the sales of many domestic automakers in January this year were nearly halved compared to those in December last year. Facing this market downturn, many automakers, represented by Tesla, started the year with financial incentives such as "seven-year ultra-low-interest" loans for car purchases, and a new round of price wars is imminent. However, the unexpected rampant surge in memory chip prices is likely to completely disrupt automakers' plans to lower prices. If nothing unexpected happens, the price war among domestic automakers may come to a temporary halt due to the significant increase in memory chip prices. Next, without the ammunition for a price war, how to attract users to make purchases will be a new challenge for major automakers in 2026.

However, the impact of memory chip shortages varies among automakers. For automakers with a high degree of intelligence, such as Tesla, Rivian, Xiaomi, and NIO, which rely more on advanced chips, the impact will be felt first. For traditional fuel vehicle models, due to their lower level of intelligence, their demand for memory chips is relatively small, and therefore, they are less affected by the price increase of memory chips. In addition, first-tier suppliers providing intelligent cockpits and intelligent driving to OEMs will also face delayed order deliveries.

In fact, compared to rising costs, automakers are more concerned about supply disruptions. Once memory chips are unavailable, it will lead to the inability to deliver vehicles to users, affecting whole vehicle sales and after-sales service, and may even affect investors' confidence in the company, triggering stock price fluctuations, and thereby affecting the implementation and execution of the automaker's long-term strategy.

How should automakers respond to memory chip shortages?

In response to this potential "memory chip shortage," automakers need to plan ahead to minimize the risk of production line shutdowns due to chip shortages.

In the short term, automakers are currently in a relatively weak position in communications and negotiations with memory chip suppliers, and it is not easy to secure more supply from them. Therefore, automakers need to consider how to adjust vehicle configurations to ensure future deliveries. For example, in the event of a chip shortage, they can simplify configurations or reduce some intelligent connected vehicle-related functions to ensure that vehicles can be delivered to customers. At the same time, automakers can also consider extending delivery cycles to appropriately alleviate pressure on the sales end.

In the long term, automakers have a long way to go.

On one hand, when designing a new generation of electronic and electrical architectures, automakers need to promote chip standardization at the research and development end to reduce reliance on specific models; at the supply chain end, automakers need to appoint multiple suppliers to minimize reliance on a single chip supplier. In addition, automakers also need to keep pace with the times and adopt more advanced process storage chips like DDR5 on whole vehicles, so that they can benefit from memory suppliers' expansion for AI giants. From a price perspective, products like DDR4 are indeed cheaper than DDR5 at present, but with future increases in supply, the price of DDR5 will inevitably have some room for adjustment.

On the other hand, automakers also need to consider whether they need to establish their own chip design and manufacturing capabilities. From the previous COVID-19 pandemic's impact on chip supply chain disruptions to the current shortage of storage chips caused by the AI boom, automakers have suffered greatly from "chip shortages." In the era of software-defined vehicles accelerating, chips have become strategic components for automakers. For large global automakers, vertical integration of chip capabilities or equity-level cooperation with chip suppliers needs to be considered at the strategic level for the future. In addition to giants like Micron and Samsung, domestic memory chip suppliers including Changxin Storage also need to be considered.

Commentary

Insufficient supply or a surge in prices of memory chips will impact automakers, either affecting deliveries or eroding profits, especially during a downturn in the automotive market, which will exacerbate the challenges for automakers. In the short term, the tightness of memory chips will continue for some time, and automakers will find ways to cope, while ensuring supply chain security is a long-term necessity.

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