August 9, 2022

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Volkswagen has entered into a long-term 1 billion euro (£840m) contract with US chip giant...

Volkswagen has entered into a long-term 1 billion euro (£840m) contract with US chip giant Qualcomm for semiconductors to be used for automated driving features, according to a Monday report from German daily Handelsblatt.

The car maker is to use a system-on-a-chip (SoC) specially developed for automated driving from 2026 onward, across all of its brands worldwide, the paper said.

The contract runs to 2031, with the first chips to be delivered in 2025, it said, citing people familiar with the matter.

Volkswagen declined to comment.

Volkswagen chief executive Herbert Diess. Image credit: VW
Volkswagen chief executive Herbert Diess. Image credit: VW

Self-driving chip

BMW also has its own arrangement to work with Qualcomm, while Mercedes has a deal with Nvidia.

While Mercedes has a profit-sharing arrangement with Nvidia, which is assisting in developing both the hardware and the software, Volkswagen is reportedly paying for the chips on a per-unit basis that allows it to retain a greater share of profits.

The auto maker’s software unit Cariad is reportedly developing the self-driving software itself, in cooperation with tech giant Bosch.

The paper said Level 4 fully automated driving features should work with the projected Qualcomm chip.

Competition

Volkswagen chief executive Herbert Diess reportedly travelled personally to Qualcomm’s headquarters in San Diego, California to sign the contract, indicating the importance of the deal.

The paper said Diess has been developing the company’s software strategy since the beginning of the year, with the deal intended to show that the strategy is making concrete progress following delays with various software projects over the past year.

Volkswagen faces intense competitive pressure as Tesla and Chinese carmakers such as Xpeng and Nio enter the European market. Tesla launched its German factory near Berlin in March.

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Auto semiconductors are becoming increasingly important, and are expected to grow to 14 percent of the entire chip market by 2030, up from 8 percent in 2021.

Car chips

Global auto chip sales jumped by 28 percent to $52bn (£41bn) last year alone in spite of a worldwide shortage of supplies, according to McKinsey.

The market analyst expects revenues in the sector to triple to around $160bn by the end of the decade.

VW has not yet decided which chips to use for its next-generation car operating system, VW.os, and is said to be in negotiations with Nvidia Qualcomm and Intel.

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