VW makes strategic move to buy directly from chip manufacturers

Volkswagen plans to avoid any future chip shortages by purchasing “strategically important” chips from ten different manufacturers.

Board member for procurement of Volkswagen Passenger Cars, Dirk Große-Loheide, says that: “A high degree of transparency in the semiconductor value chain enables us to better determine the global demand and availability of these components.”

“This is underscored by risk management which, in future, will extend to the level of individual electronic parts and help us detect bottlenecks early on and avoid them.”

The German carmaker previously depended on component suppliers to purchase chips but will now strike direct deals with chipmakers to ensure a secure supply, according to Karsten Schnake, head of Volkswagen-wide taskforce for component supply founded in 2022.

With its new strategy, Große-Loheide says Volkswagen will be able to identify bottlenecks early on and effective mitigation strategies.

As Volkswagen and other carmakers up their electric vehicle production, while also escalating the integration of advanced driver assistance systems, up to fully autonomous driving the demand for microprocessor chips has increased.

However, supply has been slow to catch up due to the investment needed and complexity in setting up chip factories.

According to Volkswagen, the increased development of semiconductors has caused an increase in value of electronic components, which is expected to double by the year 2030 from today’s average of around 600 euros per vehicle.

The selected group of manufacturers include NXP Semiconductors, Infineon Technologies, and Renesas Electronics.

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