Semi Conductor Shortage:

The automotive industry, like many other industries, has been hit hard by the COVID-19 pandemic. More than two years after the virus announced itself, the sector is dealing with a global semiconductor chip shortage and a number of destabilising COVID-19 after-effects, such as factory closures and shipping disruptions.

One of the biggest consequences of the semiconductor chip shortage has been stock shortages, which have led to an increase in vehicle delivery times. It’s an issue that will take some time for the automotive sector to overcome. However, Škoda is implementing a number of initiatives that will allow it to stabilise production and deliver cars to customers even during these challenging times.

Karsten Schnake, Škoda board member responsible for purchasing, says he’s confident Škoda has turned the corner on the semiconductor shortage.

“This year we’re seeing an improvement in chip supply and the outlook for 2023 is even more optimistic,” Schnake says.

Stabilising the supply of parts is making it possible to complete cars that had been due for delivery and these delayed vehicles are being shipped as quickly as possible. In addition, Škoda is looking to partner with semiconductor manufacturers to avoid similar supply chain issues in future. It’s part of what Schnake says is a new approach to sourcing microchips for the car industry.

This year we’re seeing an improvement in chip supply and the outlook for 2023 is even more optimistic.

“The pandemic has only accelerated the need for change, but the change would have come anyway as the demand for chips in the automotive industry is going to grow very rapidly in the future as the industry transforms,” he says.

Schnake is helping lead a new strategic project called COMPASS (Cross Operational Management Parts & Supply Security), which he says will help the Volkswagen Group, of which Škoda is a part, to improve the supply security of semiconductors. The project comprises interdisciplinary teams made up of representatives of the Group’s brands.

According to Schnake, the project involves more than just thinking about short-term or long-term chip supplies and responses to any other unexpected threats.

“It’s about rethinking how car manufacturers approach the semiconductor industry. Today, the automotive market accounts for around 10 per cent of total semiconductor demand, but with the advent of electromobility, connectivity and driving automation, this demand is set to grow significantly,” he explains. Car firms are therefore looking to become attractive partners for semiconductor manufacturers.

“We can only secure the future through collaboration,” Schnake says. “We are unlikely to manufacture our own chips but, on the other hand, we have our own specific requirements.

” Towards that end, the Volkswagen Group has started working on the possibility of designing its own chips, which would then be manufactured by partner companies for its brands. Schnake says the Volkswagen Group is also looking at ways to replace specific chips with a more universal solution that the Group can source in larger quantities.

“We are in close contact with chip manufacturers and we’re seeking partnerships with them that will give us long-term guarantees,” he says.

In response to the war [in Ukraine], the Volkswagen Group has halted its vehicle production in Russia, as well as car exports to Russia.

Nevertheless, the war has impacted European production and customer deliveries because Škoda, like other European carmakers, has subcontractors based in Ukraine. Škoda purchases cable harnesses from Ukrainian suppliers, which are necessary for the production of several of its European models.

“Standing by our partners in the Ukraine is extremely important for us. For this reason, we are working with each of them to find the most suitable solution,” Schnake says.