AI boom squeezes the mature chips that automakers rely on

The AI investment boom is creating a second automotive chip squeeze, as foundries and packaging firms—among them Nexperia—divert capacity from the mature-node components cars depend on towards higher-margin data centre products. Unlike the pandemic shortage, this one is driven by price, and automakers are ill-equipped to win a bidding war against their counterparts in AI.

Nexperia is “totally oversubscribed”, interim Chief Executive Stefan Tilger told Reuters at the Electronica trade fair in Munich, as some competitors shift capacity away from the commodity semiconductors it supplies. “The automotive industry is suffering at the moment quite heavily.” The most lucrative demand, he noted, is coming from AI data centres and robotics; years of underinvestment in the mature technologies behind diodes, transistors and other basic components have also contributed to the bottleneck.

STMicroelectronics Chief Executive Jean-Marc Chery also weighed in, stating that the problem sits well upstream of the GPU makers. “We see many bottlenecks,” he told a panel of chip industry chief executives ahead of the fair. He warned specifically that some foundries and assembly and packaging firms that once served a broad customer base “are disengaging […] from mainstream technology.”

According to Chery, not all companies are bound to take this approach, least of all his own. ST’s own manufacturing footprint, he argued, offered a degree of protection: “We control a part of our future with our capex and our manufacturing.”

Who owns the capacity and how they choose their customers could prove central to how the squeeze plays out. Integrated chipmakers such as ST can allocate their own fabs, but much of the mature-node market relies on contract foundries and packaging houses free to chase better margins. As they withdraw, automotive demand will pile onto the handful of specialists that remain.

Nexperia’s oversubscription is therefore less a sign of its own strength than automakers’ small pool of alternatives. Some OEMs are trying to pre-empt worsening shortages by investing in chipmaking capacity of their own, mostly in China, but perhaps the most prominent Western example is Tesla. The Terafab project is explicitly framed to investors as a bid to gain independence from third-party chip suppliers, although Tesla continues to court firms like Intel to handle the difficult parts of designing and running a wafer fab.

In the meantime, chip-related cost pressures are already reaching Tier 1 suppliers. Aumovio, which supplies sensors, cameras and other in-vehicle electronics to customers including BYD, BMW and Ford, has warned that its chip costs will “explode” next year. “We can tell you that there’s no price sensitivity whatsoever in that area,” said interim finance head Claus Bauer. “All of our suppliers in that regard could sell twice their capacity to this very lucrative, non-price-sensitive area.”

Several automakers have already attributed production issues to a lack of available chips. One of the more prominent recent examples is Stellantis, which blamed a shortage of engine control unit chips for halting Fiat 500 output at Mirafiori and warned that Pandina production could be disrupted into December. There is reason to believe, however, that these production halts have more to do with product demand than anything supply-side.

Ultimately, automotive constitutes a very small part of the global chip market; for DRAM specifically, industry demand is less than 10% of the global total. As such, automakers carry little weight with suppliers when compared with higher-volume customers running data centres. Even the resilience strategies automakers built after the pandemic-era chip shortage will do little here, because they were centred on buffer stocks and designed for outright disruption, rather than displacement.

However, this crunch will not look like 2021, when empty dealer forecourts made the shortage impossible to miss. Automakers will instead absorb it through higher component costs, de-contented vehicles and delayed driver-assistance features, a slow erosion of margins and product competitiveness which is easier to overlook and far harder to reverse.