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VW Group to buy semiconductor chips directly to avoid crippling bottlenecks

  • German carmaker has set up a special committee to source components
  • It comes in response to crippling delays caused by a shortage of chips since Covid
  • Price of chips set to double as more electric cars are built in the future

Time 6:28 am, August 29, 2023

Volkswagen Group is changing the way it sources semiconductor chips to ensure supply is secure in the future.

Previously, the German car giant relied on Tier 1 component suppliers to buy chips, with these firms being able to choose which chips they used.

However, Volkswagen Group will now purchase the semiconductors it needs directly from 10 manufacturers, from brands such as Infineon Technologies.

The carmaker says the move will secure itself a ‘leading position’ in the automotive industry ‘in terms of technology as well as competitiveness’.

The car industry was blighted by a shortage of semiconductors during the Covid-19 pandemic and various lockdowns since.

Some manufacturers were forced to shut down production lines completely due to a scarcity of chips.

Chips shortages were a major reason why British carmaker JLR stopped building certain models and focussed on more profitable ones such as the Range Rover and Land Rover Defender.

Improved component supplies have led JLR to return to profit recently.

The need to build more electric vehicles has also ramped up demand for chips.

A Porsche 911 of 1978 used eight chips in one control unit, whereas a 2023 Skoda Enyaq has around 90 units and some 8,000 chips, said Volkswagen.

The value of chips is set to double from the current average of around 600 euros per vehicle.

Volkswagen Group has also created a Semiconductor Sourcing Committee to iron out potential supply hiccups.

Speaking about the move to directly source chips, Dirk Große-Loheide, board member for procurement of Volkswagen Passenger Cars and member of group management, said: ‘A high degree of transparency in the semiconductor value chain – the exact knowledge of the parts used – 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.’

James Batchelor's avatar

James – or Batch as he’s known – started at Car Dealer in 2010, first as the work experience boy, eventually becoming editor in 2013. He worked for Auto Express as editor-at-large and was the face of Carbuyer’s YouTube reviews. In 2020, he went freelance and now writes for a number of national titles and contributes regularly to Car Dealer. In October 2021 he became Car Dealer's associate editor.

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