Pass the Chips: VW Group Demands More Semiconductors for Europe

Matt Posky
by Matt Posky
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]
Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • DC Bruce DC Bruce on Feb 06, 2021

    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.

    • NN NN on Feb 08, 2021

      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.

  • Schmitt trigger Schmitt trigger on Feb 07, 2021

    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.

  • SCE to AUX Here's some advice - slow down. That's a great way to arrive home safely, without a ticket, with lower blood pressure, and more economically.
  • Dartdude They need to rebrand the models, The standard model should be Wagoneer and long version should be Grand Wagoneer. There should offer the Ram Rev powertrain in these
  • Irvingklaws Seems more like they're adopting Honda styling queues. Now if they would just adopt their reliability...
  • FreedMike "Obsidian Edition."Oooooh, obsidian is really, really hard stuff.
  • John The awesome Infiniti G series saved this company 20 years ago, but they are right back on track to obsolescence. (yawn)