Volkswagen strikes direct supply deals for chips to avoid global shortage

Volkswagen secures direct chip supply agreements to prevent a global shortfall

The automaker announced on Wednesday that it had started buying strategically significant semiconductors directly from ten suppliers, including NXP Semiconductors, Infineon Technologies, and Renesas Electronics.

According to Karsten Schnake, leader of a Volkswagen-wide taskforce for component supply established in 2022, the German automaker started making direct negotiations with chipmakers last October to assure the security of its supply. The company had previously relied on its component suppliers to buy chips.

“The capacity of the whole market is insufficient. Dirk Grosse-Loheide, head of buying for Volkswagen’s passenger car business, stated, “We must act now.

In tandem with the development of electric vehicles and the demand for ever-more complicated software, the chip market has seen a sharp increase in demand in the automotive sector. Due to the difficulties of building up semiconductor plants, supply has lagged behind.

The announcement of plans to jointly create a new semiconductor by Volkswagen and the Franco-Italian chipmaker STMicroelectronics in July 2013 marked VW’s first direct collaboration with a second- and third-rank semiconductor supplier.

With billions of euros in subsidies, Berlin has been recruiting the biggest contract chipmakers in the world. This year, plants in Germany were announced to be built by Taiwanese company TSMC and American company Intel.

Volkswagen meets with TSMC, the largest contract semiconductor manufacturer in the world, every few weeks to discuss its demand position but has not established a direct supply relationship with them, according to Schnake.

In order to streamline the supply chain and simplify its software offering, the automaker also intends to reduce the variety of processors needed in its vehicles, Schnake said.


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