The Volkswagen Group is reorganizing its procurement process for electronic parts and semiconductors. This strategic move aims to secure a long-term supply and establish the Group as a leading technology and competitive player in the automotive industry. To achieve this, the Group has developed a new approach to procuring parts with electronic components.

Dirk Große-Loheide, Board Member for Procurement of Volkswagen Passenger Cars and member of Group management, emphasized the importance of transparency in the semiconductor value chain. By having a clear understanding of the parts used, the Group can accurately determine global demand and availability. This level of transparency enables effective risk management, allowing the Group to detect and prevent bottlenecks in the supply chain early on. For critical semiconductors and future developments, Volkswagen will focus on direct purchasing from semiconductor manufacturers.

In the past, Tier 1 suppliers had significant autonomy in selecting electronic components like control units. However, going forward, Group procurement will work closely with Tier 1 suppliers to define the specific semiconductors and electronic parts to be used. This collaborative effort will be facilitated by the Semiconductor Sourcing Committee (SSC), which consists of representatives from the procurement and development departments of various Volkswagen brands, as well as Volkswagen Group Components and CARIAD.

Karsten Schnake, Board Member for Procurement at Škoda Auto and head of the cross-brand and cross-functional task force COMPASS (Cross Operational Management Parts & Supply Security), explained that transparent semiconductor procurement offers several advantages. It allows for the identification and implementation of technical alternatives more swiftly in case of supply bottlenecks. It also reduces hardware variants, leading to less complex software systems.

Semiconductors are crucial components in the automotive industry. They are not only essential for mass production but also drive innovation and enable the launch of new products. The growing demand for semiconductors is primarily driven by the electrification of vehicles and the increasing use of assistant functions, including fully autonomous driving. These technological advancements require cutting-edge semiconductors, while the demand for more common semiconductors continues to rise.

This shift towards advanced semiconductors and increased electronic components in vehicles has a significant impact on their value. The value of electronic components is projected to more than double by 2030 from the current average of around 600 euros per vehicle. The automotive sector’s importance as a customer in the semiconductor industry is also growing. Currently, the automotive industry ranks fifth among major buyers, with a global procurement volume for semiconductors of around 47 billion US dollars. By 2030, it is expected to secure the third position with a market volume of approximately 147 billion US dollars.

The COVID-19 pandemic and the resulting chip crisis have highlighted the need for robust semiconductor supply chains. To address these challenges and ensure a stable supply, the Volkswagen Group launched the COMPASS initiative in early 2022. The initiative focuses on safeguarding the vehicle program and includes strategic measures based on lessons learned from the semiconductor crisis. These measures aim to provide long-term solutions for the Group’s semiconductor procurement.