Restructure semiconductor procurement strategy! Volkswagen signs purchase agreements with 10 chip manufacturers

It seems to be a trend for car manufacturers to reach purchase agreements directly with chip manufacturers. The Volkswagen Group announced that it will formulate a new procurement strategy for electronic components and semiconductors . For strategically important semiconductors, it will purchase them directly from semiconductor manufacturers .

Volkswagen restructures semiconductor procurement strategy

On August 24, Volkswagen issued a statement announcing the development of a new procurement strategy for electronic components and semiconductors to ensure long-term supply. The statement said that in the past, the procurement of electronic components such as control units was mainly decided by first-tier suppliers. "In the future, the group procurement department will work closely with first-tier suppliers to determine which semiconductors and other electronic components to use." Volkswagen said that for semiconductors of strategic importance, even for products that the group plans to develop in the future, we will purchase them directly from semiconductor manufacturers. According to the statement, Volkswagen established a semiconductor procurement committee for this purpose.

Reuters further reported that Volkswagen has begun purchasing chips directly from 10 manufacturers including NXP, Infineon and Renesas Electronics to avoid chip supply shortages.

Karsten Schnake, head of Volkswagen's parts supply working group, said that the company used to rely on parts suppliers to purchase chips, and in October last year it began to reach deals directly with chip manufacturers to ensure supply security. Schnake said Volkswagen has not yet established a direct supply relationship with TSMC , but it meets with TSMC representatives every few weeks to communicate demand. He said VW also plans to simplify the supply chain by reducing the types of chips needed in its cars, which will also help streamline its software products.

Recently, an executive of Volkswagen's Audi company said, "Although chip manufacturers plan to build factories in Germany, the semiconductor shortage that has caused a bottleneck in the German automotive industry will still take several years to resolve. It will take several years for chip manufacturers to build factories in Germany." "Automakers can alleviate this bottleneck by reducing the 8,000 different types of chips currently used in cars. We must use a variety of means to stabilize semiconductor supply and increase inventory to a certain extent."

Direct cooperation with chip manufacturers has become the consensus of more and more major automobile manufacturers. Before Volkswagen, Honda and General Motors also had similar cooperation.

Honda partners with TSMC

On April 26, Japanese automobile manufacturer Honda announced that it had reached a strategic cooperation agreement with TSMC, the leading wafer foundry, to ensure a stable supply of semiconductors.

Honda CEO Toshihiro Mibe said that Honda will establish direct cooperative relationships with first-tier suppliers and semiconductor companies to ensure long-term and stable supply of chips. This includes reaching an agreement on strategic cooperation with TSMC, and the chips purchased from TSMC will be purchased from TSMC. It will be installed on Honda models starting in 2025, and Honda plans to launch four electric vehicles in Japan before the end of 2026.

This is the first time TSMC has won an order from Honda. The industry expects that the cooperation between the two parties will be carried out in TSMC's new plant in Kumamoto, Japan, which will not only bring a stable source of orders to TSMC, but also help improve the initial capacity utilization rate of TSMC's new plant in Japan.

GM cooperates with GLOBALFOUNDRIES

In February 2023, General Motors and GlobalFoundries jointly announced that the two companies had reached a long-term agreement. GlobalFoundries will directly supply chips to General Motors to avoid the latter's possible chip shortage. The two companies said this agreement is the first of its kind in the industry. GlobalFoundries will build a production line specifically for General Motors to supply chips at its factory in upstate New York.

However, at the end of 2021, when the chip shortage was greatest, GlobalFoundries also announced a non-binding agreement with the car company Ford, which may involve increasing production capacity for Ford, but it later fell apart.

In the past, there was almost no direct cooperation between automobile manufacturers, including Honda, and semiconductor manufacturers, and they all purchased the necessary chips through component or automotive electronics suppliers. However, a series of supply chain difficulties caused by chip shortages in the past two years have forced all automakers to cut production due to the suspension of chip procurement. This has also made automakers realize that they need to establish "new connections" with semiconductor companies and are interested in trying to change Traditional supply chain model.