BMW signs agreement with chip suppliers to secure semiconductors (2024)
By: HT Auto Desk | Updated on: 12 Dec 2021, 15:00 PM
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BMW has signed an agreement INOVA Semiconductors and GlobalFoundries that will guarantee the automaker supply of millions of microchips per year.BMW a
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BMW said the new microchips will be incorporated for the first time in the brand's flagship model, BMW iX SUV.
As the global semiconductor shortage looms over the automobile industry, many automakers are getting into partnerships with chip suppliers to ensure a hassle-free supply of semiconductors. After Stellantis, BMW is the next. To secure chip supplies, the Bavarian automaker has signed a direct supply assurance agreement with high-tech microchip developer INOVA Semiconductors and GlobalFoundries, a manufacturer of feature-rich semiconductors.
The agreement guarantees BMW supply of millions of microchip per year. The company informed that these microchip will be used in the ISELED smart LED technology co-developed by the company. These chips will be incorporated for the first time in the brand's flagship model, BMW iX SUV. It will also be rolled out in the rest of the models.
Dr Andreas Wendt, a member of the board of management of BMW AG responsible for purchasing and supplier network said the agreement between the companies marks the next logical step for ensuring a steady supply of microchips. “We are deepening our partnership with suppliers at key points in the supplier network and synchronising our capacity planning directly with semiconductor manufacturers and developers. This improves planning reliability and transparency around the volumes needed for everyone involved and secures our needs for the long term," he added.
BMW shared that this agreement will help to build a more resilient supply chain partnership approach to regain a balance in the supply-demand process for chips. It will also push the company towards more innovative technology.
Robert Kraus, CEO of INOVA Semiconductors said that this agreement directly with an OEM certainly is an achievement unlocked as a semiconductor manufacturer. Mike Hogan, senior vice president and general manager of Automotive, Industrial and Multi-market at GlobalFoundries shared is committed to delivering the growing demand for feature-rich chips. “This supply assurance agreement with the BMW Group and INOVA demonstrates how the companies are partnering to develop innovative smart LED technology for the new BMW iX and to develop new technologies for the car of tomorrow," Hogan also stated.
The agreement guarantees the BMW Group the supply of several million microchips per year. The microchips will be used in the ISELED smart LED technology co-developed by the BMW Group, which will be deployed for the first time in the BMW iX and rolled out in further models.
BMW signed a long-term deal to secure semiconductors for in-car lighting systems after a global shortage of the components led to shutdowns at some of its factories. The automaker has signed an agreement with Inova Semiconductors and Globalfoundries, guaranteeing the supply of "several million" chips a year.
Other issues, such as PFAS regulations, China-Taiwan relations, and ESG regulations, are still hurdles to a more robust global semiconductor supply chain. The top 5 disruptions through Q3 2023 are: Factory Fires — 1250 Alerts — -19% decrease YoY. Mergers & Acquisitions — 831 Alerts — -20% decrease YoY.
The BMW Group works with around approximately 13,000 1st tier suppliers in more than 70 countries. The BMW Group's global supplier network makes a major contribution to value creation, quality and innovation of our products and is therefore critical to the success of the BMW Group and its sustainability performance.
In November of last year, the chip shortage forced the company to drop touchscreen functionality in models like the 3 Series, 4 Series, Z4, and several crossovers. It's just not touchscreens and tech that are being affected, either.
Causes. The global chip crisis was due to a combination of different events described as a perfect storm with the snowball effect of the COVID-19 pandemic being the primary reason for accelerating shortages. Another contributing factor is that demand is so great that existing production capacity is unable to keep up.
The semiconductor industry creates integrated circuits, which are commonly known as microchips. The global chip shortage means that it is much harder to procure the materials necessary to build devices that process information, such as computers, smartphones, video games, and high-tech industrial equipment.
One solution is to increase investment in semiconductor manufacturing capacity. This could involve building new factories, expanding existing ones, or investing in research and development to improve production efficiency.
We source components, materials and services from a large number of production and delivery locations, and our suppliers are bound by contract to meet our sustainability standards by ensuring the social and environmental due diligence specifications in our agreement are meet.
In addition, the BMW Group and Toyota Motor Europe entered into a contract in December last year, under which the BMW Group will supply highly efficient 1.6 litre and 2.0 litre diesel engines to Toyota Motor Europe starting in 2014.
BMW was originally founded as an engine producer called Rapp Motorenwerke, but later changed its name to Bayerische Motoren Werke (BMW) in 1917. In 1922, BMW merged with the aircraft company Bayerische Flugzeug-Werke. Today, BMW Group owns BMW, Rolls-Royce, Mini, and BMW Motorrad.
Will the chip shortage remain in the past? We're nearing the end of the supply crunch after more semiconductor capacity came online in 2022 … Looking ahead, we don't predict any major constraints. Chip supply began to improve in 2022 and looks set to continue through 2023.
Prices will begin to adjust a month or so after the supply catches up with demand. The new “normal” price will be higher than before the shortage for several reasons: One, the shortage has shown that people will pay a higher price. Two, inflation has reduced the value of the dollar, so you will pay more dollars.
Many market analysts agree that the supply chain should be restored to normal capacity and production by the end of 2023 and continue for the next three to five years, with the shortage of AI chip supplies alleviated by the end of 2024.
The news comes after BMW recently signed an agreement with San Diego-based Qualcomm to use its chips in the carmaker's next generation of driver-assistance and autonomous-driving systems. Qualcomm is the world's biggest chip supplier for mobile phones but is diversifying its business.
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