Volkswagen Group has announced that the company is embarking on a comprehensive overhaul of its approach to procuring electronic components and semiconductors, aimed at ensuring a steady supply over the long run and bolstering its technological prowess and competitive edge.
In a strategic move, the company intends to enhance transparency within the semiconductor value chain, gaining precise insights into the utilized parts. This initiative, coupled with advanced risk management strategies, will enable the early detection and mitigation of potential supply bottlenecks. The company will forge partnerships with semiconductor manufacturers for pivotal components and future proprietary developments.
The procurement transformation entails a significant shift from past practices where Tier 1 suppliers largely dictated component choices. Going forward, in collaboration with Tier 1 suppliers, Volkswagen Group procurement will dictate the selection of semiconductors and electronic components across all brands. This process will be overseen by the Semiconductor Sourcing Committee (SSC), comprising representatives from brand procurement and development departments, Volkswagen Group Components, and Cariad.
Semiconductors are paramount in the automotive industry, underpinning mass production and innovation. The escalating demand for semiconductors is driven by the burgeoning electrification of vehicles and the upswing in advanced driver assistance systems. This shift to cutting-edge semiconductors transforms vehicle design, with modern vehicles now incorporating around 90 control units and 8,000 electronic components. Consequently, the value of electronic components in a vehicle is projected to more than double by 2030.
The Volkswagen Group’s revamped approach considers the lessons learned from the chip crisis induced by the COVID-19 pandemic. To secure semiconductor supply and mitigate future disruptions, the company initiated the Compass initiative in 2022. This initiative seeks to safeguard the vehicle program by identifying strategic action points and implementing sustainable solutions.
By revamping its semiconductor procurement strategy, the Volkswagen Group is positioning itself to lead the automotive industry in technology adoption, while fortifying its supply chain resilience in the face of evolving market dynamics.
