Chip crunch to continue through 2023: VAG

VOLKSWAGEN GROUP procurement boss Murat Aksel says the microprocessor shortage affecting the automotive industry is likely to continue through 2023 and possibly into 2024.

Speaking to German publication Automobilwoche this week, Mr Askel said VAG and others no longer expect the chip crisis to end next year, and that to date, only small signs of improvement in supply have been realised.

“Overall, the situation has improved, but only in small steps,” he said.

“Investments for new capacity are now on track, but there will probably still be a structural shortfall in semiconductors up to and including 2023.”

Recently, Mr Askel said he had hoped to have the worst of the semiconductor crisis behind him by next year, but now admits he has abandoned that hope.

“It’s a structural issue that cannot be solved so quickly. It takes years to build up new capacity.”

Industry experts warn the additional problem of manufacturers deliberately channelling scarce chips into high-margin, upper-range models is causing greater demand for microprocessors, despite falling unit numbers.

On the bright side, Mr Askel says the outlook for cable harness production looks significantly better as supply chain stability returns, adding that the task force set up after Russia’s invasion of Ukraine has done an excellent job.

“The success, as we said from the beginning, is that we stand clearly and permanently by our suppliers in Ukraine, but at the same time we are building backup sites in other countries,” he said.

Mr Askel said that while this doubling of capacity creates additional costs, if the situation the Ukraine conflict worsens, the company will require such backup measures to already be in place.

Beyond microprocessors and wiring harnesses, Mr Askel warned of further dislocation across supply chains were likely in the future.

“What we have seen in the supply chains over the past two years is the new normal, and with the new geopolitical issues, if anything, it’s going to get more complex and challenging.”

However, Mr Askel said Volkswagen is better prepared for challenges than it has been in the past and that in the short term, VAG is investing it what it calls ‘early detection’ of potential issues, as well as secondary suppliers for critical components.

“In a similar way, we need to prepare for other problems in the supply chain,” he said.

“But that only applies to critical components … in the long term, you will not always be able to have two suppliers, that is not going to work.”

with Automobilwoche