VW is changing its component procurement strategy
The Volkswagen Group is realigning its procurement strategy for electronic components and semiconductors in order to secure long-term supplies. The new strategy now aims to procure strategically important semiconductors directly from the manufacturers and take more direct control of the supply chain.
In the past, electronic components such as control units were procured and it was largely up to the suppliers which components they used. From now on, “in close collaboration and partnership with Tier 1 suppliers, Group procurement will define which semiconductors and other electronic parts are to be used”, as Volkswagen wrote.
According to VW, the biggest increase in semiconductor demand is coming from the increasing electrification of vehicles and the trend towards the increased use of assistance functions. This was already evident when semiconductors became scarce in the wake of the Corona pandemic and existing components had to be prioritised in production. Thus, basic models with lower margins were cancelled in favour of more profitable variants. In the course of this, it also became clear that VW sometimes did not even know exactly which semiconductor components were selected by suppliers and built into their cars.
VW wants to avoid such bottlenecks with its new strategy, as the importance of semiconductors for the group’s products will also tend to increase. “Semiconductors are indispensable in the automotive industry: they are not only elementary for series production, but also drivers of innovation and important for the market launch of new products,” the statement says. A separate “Semiconductor Sourcing Committee” (SSC) with representatives from Procurement and Development of the brands as well as from Volkswagen Group Components and CARIAD will make important decisions in the future and define which semiconductors and electronic components will be installed in the Group’s cars.
“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,” says Dirk Große-Loheide, Member of the Board of Management for Procurement at Volkswagen Passenger Cars brand and Member of the Extended Group Management. “For strategically important semiconductors and even the Group’s own planned developments in the future, we will rely on direct purchasing from the semiconductor manufacturers.”
A first order has already been announced: Earlier this year, Volkswagen placed a major order with US semiconductor manufacturer Onsemi for silicon carbide power modules for use in future electric cars.
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), hopes for further advantages of the new procurement strategy: “Another positive effect is that a reduction in the diversity of variants in the hardware results in a lower degree of software complexity.”
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