Automakers Announce Agreements to Improve Supply of Semiconductor Chips

In the midst of a global shortage of semiconductor chips that is affecting manufacturers in a wide range of industries, Stellantis and BMW have become the latest automakers to announce moves to improve their supply of these critical components that enable today’s high-tech, connected vehicles.

Stellantis announced Tuesday (Dec. 7) that it has partnered with electronics manufacturer Foxconn to design and sell semiconductors for both Stellantis and third-party customers in the automotive industry.

“With Foxconn, we aim to create four new families of chips that will cover over 80% of our semiconductor needs, helping to significantly modernize our components, reduce complexity and simplify the supply chain,” Stellantis CEO Carlos Tavares said in a press release. “This will also boost our ability to innovate faster and build products and services at a rapid pace.”

Responding To a Shortage That is Affecting New Vehicle Sales

Stellantis is one of several automakers that reported that their new vehicle sales dropped in the third quarter due to ongoing supply chain issues and the shortage of semiconductor chips. The shortage of computer chips needed to build vehicles has been affecting the industry for more than a year.

Related news: Semiconductor Chip Shortage Limits Auto Sales in Q3

The automaker reported that its newly announced initiative is one of several that will reduce the complexity of semiconductors and increase its capabilities, which is increasingly important as vehicles become more defined by software. For Foxconn, the agreement with Stellantis expands its involvement in the automotive space, adding to its existing expertise in producing semiconductors for consumer electronics.

Another automaker, BMW Group, announced Wednesday (Dec. 8) that it has signed direct agreements with chip suppliers that will secure several million semiconductors per year. Beyond that, the company says it will work with suppliers in new ways and will continue to become more closely involved in the supplier network.

“We are deepening our partnership with suppliers at key points in the supplier network and synchronizing our capacity planning directly with semiconductor manufacturers and developers,” Dr. Andreas Wendt, member of the Board of Management of BMW AG, said in a press release. “This improves planning reliability and transparency around the volumes needed for everyone involved and secures our needs for the long term.”

Software-Defined Vehicles Requiring More Chips

BMW Group signed its trilateral direct supply assurance agreement with semiconductor manufacturer INOVA Semiconductors and semiconductor foundry GlobalFoundries. Like Stellantis, BMW noted in its announcement that the number of semiconductors contained in vehicles — which already stands at thousands per car — is likely to increase.

Beyond vehicle manufacturers, the global semiconductor shortage has affected home appliance makers, medical equipment and other electronics.

Read more: No End in Sight for Global Chip Shortage

The shortage is getting worse almost a year into the crisis because the demand for semiconductors never slowed down and shows no signs of doing so anytime soon, the supply chain bottleneck has kept materials from getting to manufacturers who can increase manufacturing, and production issues hampered factories as they tried to keep up.