Volkswagen is working with STMicroelectronics to design processors for the E2.0 version of its standard software. The automaker has locked down TSMC's manufacturing resources. Volkswagen's investment in the semiconductor industry is growing. On Wednesday, Cariad, the automaker's software division, and STMicroelectronics (ST) announced their partnership on a new semiconductor project. The semiconductor company is interested in working with Cariad to produce the chips for VW's software unit platform E2.0.

ST provides the semiconductor architecture, and it is up to Cariad to determine the features and specifications for the chips. The chips created in collaboration will handle connectivity, energy management, and over-the-air software upgrades in Volkswagen Group vehicles. Without taking it into the shop, you can update the car's software through the internet.

Volkswagen has signed another semiconductor arrangement to complement its earlier collaboration with Qualcomm. Starting in 2026, the American company will give Volkswagen high-tech chips for the onboard computers of the cars, which will make automatic driving possible.

So-called zone controllers are the primary end-use for the ST-developed processors. Automobiles with zone controllers make it possible to hand off essential functions like adjusting the climate or the seats to a more convenient device. Each of these features has traditionally been managed by a different control module. A zone controller will be able to replace several current control mechanisms.

Something unique about the partnership is that contract manufacturer TSMC is involved. The world's leading chip maker will reserve wafer production capacity for the VW and ST chips. "With the planned direct cooperation with STMicroelectronics and TSMC, we are actively redefining our entire semiconductor supply chain," explains Murat Aksel, VW Board Member for Purchasing. It's important to us to have a steady supply of high-demand microchips, so we plan to build what we need for our electric vehicles," explains Aksel.

At the earliest, we may expect electric vehicles equipped with E2.0 software to hit the market in 2027. The partnership between the two companies aims for Volkswagen to get a stronger foothold in the chip supply chain and take steps to avoid another chip shortage.

At the start of the year 2020, a shortage of semiconductor supplies was evident due to the corona crisis. Automakers and suppliers like Bosch and Continental have both been criticized for this.

Suppliers, who had previously established chip supply contracts directly with semiconductor manufacturers, had cut chip delivery amount called up from the manufacturers too much during corona lockdowns, which, from the vehicle manufacturers' perspective, was a problem. Then they delegated the production duties to someone else.

However, the auto suppliers insist that they have calibrated the chip call-off quantity to the anticipated vehicle production numbers. However, the availability of semiconductors was already threatened by external forces, including corona, a fire at a critical chip manufacturer in Japan, and a general lack of raw materials.

Herbert Diess (Volkswagen's CEO) directly intervened to lobby contract manufacturers like TSMC to increase semiconductor production for the auto industry. Yet, the semiconductor industry rejected Diess's proposals. Contract manufacturers believe the auto industry must take a back seat to other sectors regarding expanding manufacturing capacity. Volkswagen's annual sales dropped by over nine million because of this.

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