This year, Audi organized the Group's third Semiconductor Summit, a meeting with semiconductor manufacturers.

Talk among procurement executives: “Semiconductors will become the nerve cells of our cars”

Semiconductors are found almost everywhere in a modern vehicle: from the engine control to assistance and safety systems such as distance radar or ESP to the infotainment system. Up to 8,000 of them are installed in an electric car from Audi or Volkswagen today. These chips are indispensable and an important building block of innovation in the automotive industry. Audi is shaping the future of mobility together with the Volkswagen Group and technology leaders from the microelectronics industry. To this end, the company held the third group-wide semiconductor summit in June with the title “Innovation needs Coopetition”. In an interview, Audi Procurement Board Member Renate Vachenauer and Volkswagen Procurement Board Member Dirk Große-Loheide explain what coopetition is all about, whether the Group’s semiconductor strategy is successful and why much more needs to be done for Europe as a location for automotive semiconductors.

Mr. Große-Loheide, a few months ago everyone was talking about chip shortages. Are you still struggling with this and what role does the automotive industry currently play in the semiconductor industry?

Dirk Große-Loheide: After the corona pandemic, we, like almost all manufacturers, had to deal with great pressure on the existing supply chains. We have learned from this and have been able to draw important conclusions. The situation has since improved significantly. But we are also in a completely different position today: We have developed a semiconductor procurement strategy. Among other things, we work much more closely with direct suppliers and also directly with semiconductor manufacturers. Evidence of this is the direct contractual relationships with chip manufacturers – since the beginning of 2023, the Group has concluded over ten direct contracts with semiconductor manufacturers. In direct exchange with them, demand development and technical roadmaps are closely coordinated. We provide safety stocks for critical components, to name just a few of the numerous measures that increase our resilience to crises. At the same time, the automotive industry is now one of the fastest growing markets for semiconductors. Due to the rapid increase in digitization and electrification of our vehicles, semiconductor sales will triple in the decade up to 2030 to around US$ 150 billion. Ergo, we are also of great importance as a strategic customer for the semiconductor industry.

Why the title of the Semiconductor Summit “Innovation needs Coopetition” and what exactly does coopetition mean, Ms. Vachenauer?

Renate Vachenauer: “Coopetition” is the well-balanced equilibrium between competition and cooperation. We want to focus on this in the area of ​​automotive semiconductors as well. Because semiconductors will be the nerve cells of our cars. We ensure transparency with regard to our technical and commercial guidelines, show our technology strategy and take a much stronger position along the value chain. Our Tier 1 and Tier 2 partners can adapt to our requirements, enter the innovation competition and gain planning security through close partnerships. I am therefore particularly pleased that we had these top decision-makers from the microelectronics industry as guests in Munich to shape our future cooperation under the leadership of the Volkswagen Group. We have made a lot of progress here with our partners.

When will Audi or Volkswagen customers benefit from the innovations mentioned?

Renate Vachenauer: We can already speak of technology advancement – powered by semiconductors. Such semiconductors are a crucial component in making cars – such as our fully electric Audi Q6 e-tron – unique. One highlight is the second generation of our digital OLED technology in the rear lights. This enables us to communicate with other road users for the first time, for example by displaying warning symbols in dangerous situations. We need high-performance semiconductors for this feature. We are also making advancement tangible in other areas such as e-mobility, efficiency, connectivity and driver assistance. With the upcoming model launches, we are bringing a lot more to market for our customers to inspire them with a holistic driving experience.

Is Europe even future-proof in terms of microelectronics, given the needs of the automotive industry and competition from Asia, Mr. Große-Loheide?

Dirk Große-Loheide: Many important topics have now been initiated and addressed. For example, the EU Chips Act was passed. Nevertheless, innovations continue to take place mainly outside Europe. This is also due to the cost disadvantages of developing and producing semiconductors in Europe. As a result, we must make greater efforts and, for example, invest even more in research and development of semiconductors and in the training and qualification of specialists. At the same time, we see the advantages of globalization being called into question when we look at the geopolitical risks. We – first and foremost politicians, of course – must find the right answers to this. Because even if we are focusing on greater localization in various regions of the world, such as China, this cannot be the sole solution to the growing geopolitical challenges.

What vision do you want to implement together with technology leaders in the semiconductor industry?

Renate Vachenauer: We must manage to build on three main pillars. Firstly, we must continue to work together with the microelectronics industry on a resilient supply chain. This includes, among other things, that we as car manufacturers are more transparent about what we need. At the same time, it is crucial that reserves are built up for important semiconductors. Secondly, our aim is to increase profitability through uniform standards or increased interchangeability of different semiconductors. And thirdly, we naturally want to drive innovation by overlaying the roadmaps being pursued in both industries.

Dirk Große-Loheide: As with all of our products, the wishes of our customers form the basis. That is why we work along our roadmaps for customer functions and innovations, where we cooperate closely with our partners. We are also on the way to the Software-Defined Vehicle (SDV), a completely new approach to the future product development process. For us, this means that we and our partners are creating a common understanding of future vehicle requirements, and this leads to strategic cooperation, for example for the co-design and co-development of semiconductors. The bottom line is that we will also significantly increase the speed of development, I am convinced of that.

You can also read this interview in the current eMove360° magazine in german language. Download the PDF for free or order the print version from the eMove360° shop.