Volkswagen Reaches Direct Supply Deals With Chipmakers To Avoid Shortage

Photo: Reuters According to Reuters, Volkswagen has started buying strategically significant chips directly from ten manufacturers, including NXP Semiconductors, Infineon Technologies, and Renesas Electronics, because it anticipates a global shortage of these components.

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

Automotive News Europe reported that chip demand in the automotive industry has risen dramatically in tandem with the production of electric vehicles and the need for increasingly complex software. Because of the difficulty in setting up chip factories, supply has been slow to follow.

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

With billions of euros in subsidies, Berlin has courted the world's largest contract chipmakers. This year, Intel in the United States and TSMC in Taiwan announced plans to build factories in Germany.

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

Schnake added that the carmaker plans to reduce the number of chips required in its vehicles in order to simplify the supply chain, which will also help simplify its software offering.