By on February 5, 2021

Residual complications from COVID-19 lockdowns and overdependency on Central Asian suppliers have left most of the automotive industry fretting over where they’ll be sourcing their semiconductor chips in 2021. What started as an issue forcing a handful of manufacturers to rejigger their assembly schedules has evolved into a worldwide problem. This week, practically every automaker with a global footprint announced that it would be suspending production at key facilities to contend with the shortage or issued warnings that their Q1 earnings might be negatively impacted if supply failed to stabilize.

On Thursday, Volkswagen Group decided this was unacceptable and demanded that something be done about it in Europe — which is the region that has arguably been hit the hardest. 

“We won’t produce chips ourselves,” Markus Duesmann, VW Group’s board member for R&D and CEO of Audi, told Reuters in an interview. “But of course we would like to have strong chipmakers that are at least on par with Asia and the United States.”

Noting that technology would be essential for VW’s success, Duesmann suggested that Europe really should be leading in modern tech his company driving the charge. While not the first automaker to do so, Volkswagen has also announced how important software would be to the business moving forward — though we’d suggest it has a ways to go before it can brag about it. However, without the necessary components (semiconductors) to store and move said data, the point is moot.

The chips must flow.

From Reuters:

One way to achieve this, he said, could be funding programs modeled after an existing plan to boost Europe’s battery cell technology under a scheme called Important Project of Common European Interest (IPCEI).

Germany on Wednesday said European countries were planning to support the local production of technology hardware, including processors and semiconductors, via an IPCEI, with targeted aid that could result in investments of up to 50 billion euros ($60 billion).

With the demand for semiconductor chips unlikely to dwindle anytime soon, it seems a sensible plan. But there’s currently no cosigner willing to foot the bill or a strategy for exactly where the funding will be directed. That’s understandable since everyone is scrambling to mitigate the core issue. However, Europe will need to act fast against the chance that other regions decide it’s better to hoard the chips they have now than trickling out components to keep global supply chains moving.

[Image: Gyuszko-Photo/Shutterstock]

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7 Comments on “Pass the Chips: VW Group Demands More Semiconductors for Europe...”

  • avatar

    This week my family announced its intent to produce all of our own paper products by 2035 (cardboard might be 2040).

    Vaccine update:

    And the detail (bookmark this now for later reference):

  • avatar
    SCE to AUX

    The only reason Europe isn’t big on chipmaking is cost. Now that VW (and everyone else) is desperate, suddenly nobody cares.

    “But there’s currently no cosigner willing to foot the bill or a strategy for exactly where the funding will be directed.”

    Any new chip plants would be a couple years away from frution. They don’t just pop up overnight. As is typical, nobody wants to pay for it.

  • avatar

    ….Volkswagen Group decided this was unacceptable and demanded…

    You are in a position to demand nothing. I am in a position to grant nothing.

  • avatar

    Europe has chipmakers like Infinion and Philips. Or ARM and some other companies making chips for military and space applications, but that is in UK not Europe. They can expand. I understand that white people do not want to make chips but hey they have Syrians and immigrants from Africa.

  • avatar
    DC Bruce

    Once again, the consequences of managing a supply chain solely to optimize cost become evident. China has played this principle to the utmost, as it has become — one way or another — the lowest cost producer of all kinds of things. The supply chain cost optimizers shift to Chinese supply, and other supply dries up. And then . . .

    I’m not saying that this is the case with chips and China . . . not yet. But it will be unless the pencil-heads figure out how to add a value for supply chain diversity into their spreadsheets.

    As the sole-sourced products become increasingly sophisticated, it becomes increasingly difficult to develop alternate supply quickly. It’s not like inventing fracking to break the mid-east petroleum monopoly.

    Back in the antediluvian days, that was the reason for vertical integration. It minimized the risk of supply chain disruption, but it was not the most cost-effective.

    • 0 avatar

      What goes around comes around. Vertical integration is coming back into vogue as supply constraints and national conflicts illustrate the need for ownership of your supply chain. The great migration to Asia in manufacturing was based off of endless low cost & willing labor resources. With high levels of automation, building manufacturing capabilities in high-cost areas becomes feasible again. Tesla builds in California, soon Texas and Germany (and yes, China also). They use high levels of automation and do a lot in-house. Hate all you want on Elon, he’s built the machine that makes the machine. They were buying chips from NVIDIA but started making their own I believe last year.

  • avatar
    schmitt trigger

    Just like in the 1960s, where the West became over dependent on Middle East oil, and became an easy embargo target, nowadays it has become over dependent on Far East electronics.

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