BMW Group has signed a direct supply agreement with microchip developer Inova Semiconductors that will build chips for the automotive OEM at GlobalFoundries (GF) manufacturing fabs.
The agreement will guarantee BMW Group will receive a supply of several million microchips per year. These chips will be used in the ISELED smart light emitting diode (LED) technology co-developed by the BMW Group and deployed for the first time in the BMW iX and rolled out in future models.
This is the second automotive OEM to sign up with GF in less than two weeks for automotive chips after Ford signed an agreement with GF to supply the car giant with future semiconductors.
The move comes as the semiconductor industry is struggling with an ongoing shortage due to the COVID-19 pandemic.
The automotive industry was hit hard by the shortage specifically. When the pandemic first emerged, automakers reduced demand for semiconductors believing demand for cars would falter. When demand emerged despite the pandemic, chip manufacturers had shifted to hot, in-demand products such as consumer electronics and computer systems due to stay-at-home orders.
This caused automotive companies to reduce targets for car shipments and revenues for 2021, resulting in some delays and a reduction in the number of vehicles that could be produced.
“We are deepening our partnership with suppliers at key points in the supplier network and synchronizing our capacity planning directly with semiconductor manufacturers and developers,” said Andreas Wendt, member of the board at BMW AG. “This improves planning reliability and transparency around the volumes needed for everyone involved and secures our needs for the long term. This pioneering agreement marks the next logical step in securing our supplies in an even more proactive manner going forward.”
BMW said the agreement is a strategic shift to build a more secure and resilient supply chain partnerships and accelerate technology development for automotive technology. Every car contains several thousands of semiconductors for all the electronic devices inside. As more tasks get added to vehicles such as electrification, automation and wireless connectivity, even more semiconductors will be required.
As a result, chip content is only growing in the automotive space for the foreseeable future. Many companies, governments and organizations are looking to diversify where chips are made from just a few locations (mainly Taiwan, China and Korea) to numerous locations in case future geopolitical issues or pandemics impact the supply chain again.