VW reaches direct supply deals with chipmakers to avoid shortage

VW reaches direct supply deals with chipmakers to avoid shortage

Automotive News Europe — 2023-08-23

Automotive Industry

Volkswagen Group has begun purchasing strategically important chips it believes will be in short supply globally directly from 10 manufacturers including NXP Semiconductors, Infineon Technologies and Renesas Electronics.

VW Group previously relied on its Tier 1 component suppliers to purchase chips. The suppliers were largely free to decide which parts they used.

The automaker began striking direct deals with chipmakers last October to ensure its supply was secure, according to Karsten Schnake, Skoda's head of procurement who also also in charge of VW Group's COMPASS (Cross Operational Management Parts & Supply Security) taskforce for component supply.

Increasing electrification of vehicles and the trend towards the growing use of assistant functions for autonomous driving is increasing demand for semiconductors.

"In 1978, only eight semiconductors were installed in a control unit of a Porsche 911. Today, a Skoda Enyaq has around 90 control units with some 8,000 electronic components," VW said in a news release.

The value of electronic components in a vehicle will more than double by 2030 from today's average of around 600 euros per vehicle, according to the automaker.

Today, the auto industry is in 5th place among the major buyers with a global procurement volume for semiconductors of around $47 billion, VW added. By 2030, the industry is expected to be in third place with a market volume of around $147 billion.

VW and Franco-Italian chipmaker STMicroelectronics announced plans last July to co-develop a new semiconductor, marking VW's first direct relationship with a second- and third-rank semiconductor supplier.

The German government has been courting the world's largest contract chipmakers with billions of euros in subsidies. US-based Intel and Taiwan's this year announced plans to build factories in Germany.

VW has not struck a direct supply relationship with TSMC, the world's biggest contract manufacturer of semiconductors, but meets with them every few weeks to communicate its demand situation, Schnake said.

The automaker also plans to reduce the variety of chips required in its vehicles to simplify the supply chain, which will also help simplify its software offering, Schnake said.