Volkswagen Takes Direct Approach to Secure Chip Supply for Global Operations

Volkswagen, the German automotive giant, has taken a strategic step to ensure a stable supply of crucial semiconductor chips by directly procuring them from 10 prominent manufacturers.
VolkswagenAmong the chipmakers included in this initiative are NXP Semiconductors, Infineon Technologies, and Renesas Electronics. This move comes as a response to the ongoing global shortage of chips, which has significantly impacted various industries, including automotive manufacturing.

Traditionally, Volkswagen relied on its component suppliers to handle chip procurement. However, since October of last year, the company began establishing direct partnerships with chip manufacturers to bolster its supply chain resilience. Karsten Schnake, the head of Volkswagen’s taskforce for component supply, emphasized the necessity of this strategy due to the insufficient capacity in the global chip market.

Dirk Grosse-Loheide, the purchasing chief for Volkswagen’s passenger car brand, highlighted the mounting demand for chips in the automotive sector. As electric vehicle production rises and software complexities increase, the need for chips has surged. Unfortunately, chip supply has struggled to keep pace due to the intricate nature of setting up chip fabrication facilities.

In a noteworthy collaboration, Volkswagen joined forces with the Franco-Italian chipmaker STMicroelectronics in July of last year. This marked Volkswagen’s initial direct engagement with semiconductor suppliers beyond the top-tier manufacturers. This strategic move aimed to bolster the company’s chip supply chain.

The global semiconductor landscape has witnessed other significant developments as well. Notably, U.S.-based Intel and Taiwan’s TSMC have announced plans to establish chip manufacturing facilities in Germany. Although Volkswagen has not formalized a direct supply relationship with TSMC, which is the world’s largest contract semiconductor manufacturer, the company maintains regular communication with them to communicate its demand needs.

To streamline its supply chain and simplify software offerings, Volkswagen intends to reduce the diversity of chips utilized in its vehicles. This strategic decision aims to mitigate complexities and enhance the company’s overall operational efficiency, news report from Reuters said.

The step taken by Volkswagen to directly procure chips from key manufacturers reflects a broader trend among industries to mitigate the impact of chip shortages. As technology continues to play an ever-greater role in various sectors, securing a stable supply of semiconductors has become a critical priority for businesses worldwide.

Volkswagen earlier announced that its sales revenue increased to EUR 68.76 billion in the first-half of 2023 from EUR 53 billion in the first half of 2022. Volkswagen has sold 2,450,000 vehicles in the first-half of 2023 from 1,956,000 vehicles in the first half of 2022.