The chip mystery behind Volkswagen BMW's core supplier being forced to reduce production

When ZF's Schweinfurt factory in Germany reduced the shift of its electric transmission system production line and Bosch's Salzgitter factory shortened working hours, these two core suppliers of Volkswagen and BMW reduced production, once again sounding the alarm for the global automotive supply chain. Tens of thousands of employees are facing reduced working hours, and the chip inventory of German car companies can only be maintained for 10-20 days. This sudden production halt is not an accidental event caused by a single factor, but an inevitable result of the concentrated outbreak of deep-seated contradictions in the global industrial chain.

The direct cause of the supplier's production reduction this time is the dual dilemma faced by Anshi Semiconductor, the world's largest supplier of basic semiconductor devices. Due to the geopolitical competition over control of the Dutch headquarters, the export license of its Chinese factory has been suspended, and a sudden equipment failure at the Dutch factory has caused some production lines to shut down. It will take at least 4 weeks to resume production.

As the "chip lifeline" of the automotive industry, Anshi Semiconductor produces billions of chips every year, with over 60% supplied to the automotive industry. German car companies such as Volkswagen and BMW are its long-term customers. More importantly, although the basic semiconductor devices produced by it have low technological content, they are critical components that cannot be omitted - with a single vehicle usage of hundreds, covering core functions such as in car entertainment and engine control. Once the supply is cut off, the entire vehicle cannot be taken offline. This deep dependence on a single supplier leaves the supply chain with almost no buffer space in the face of sudden risks.

If the Anshi Semiconductor scandal is the "trigger", then the structural imbalance of global chip production capacity is a long buried "explosive barrel". The production capacity of 8-inch wafers required for automotive chips continues to be tight, and the explosive growth of new energy vehicles further exacerbates the supply-demand imbalance. Data shows that traditional fuel powered vehicles require around 400 chips per bike, while electric vehicles require over 1000 chips, and intelligent connected vehicles require as many as 1400-2000 chips. The demand for chips is growing almost exponentially.

But the expansion of chip production capacity is difficult to keep up with the pace of demand. The semiconductor industry has the characteristics of large investment scale and long construction cycle. A wafer production line often takes 2-3 years from planning to mass production, and the investment can easily reach billions of dollars. After the global chip shortage in 2021, although there are plans to expand production capacity, competition in industries such as consumer electronics and data centers has always put the allocation of automotive chip production capacity at a disadvantage. This long-standing supply-demand gap keeps the automotive supply chain in a "tight balance" state, and any disturbance could trigger a supply crisis.

Behind the supplier's reduction in production, there are also deep-seated hidden dangers of ecological deterioration in the automotive industry. As the overall profit margin of the automotive industry drops to a historical low of 4.5% in 2024, market competition pressure is transmitted upwards along the industry chain, and it has become a common phenomenon for OEMs to transfer cost pressure to upstream suppliers. This pressure transmission is not only reflected in price squeezing, but also in capital occupation.

Faced with the production crisis caused by reduced production by suppliers, car companies have begun to take emergency measures. BMW implements a "chip sharing" strategy, allocating some chips from high-end models to main models with higher sales to ensure that the production of core products is not severely affected; Volkswagen established an emergency team and adjusted the production line schedule, forcing some employees to take paid leave. But these measures are ultimately temporary solutions that only address the symptoms and not the root cause.

On the supply side, car companies should promote diversified supply chain layout, reduce dependence on single suppliers and regions, and establish alternative supply systems for key components; On the production capacity side, it is necessary for host manufacturers and chip companies to establish a long-term strategic binding, ensuring production capacity supply through joint investment, long-term orders, and other means; On the ecological side, it is necessary to reshape the partnership between the host factory and the supplier, shorten the payment period, price reasonably, and provide sustainable development space for the supplier.

The global chip shortage in 2021 led to a three-month production halt in the German automotive industry, resulting in a reduction of 1.2 million vehicles for the entire year and a direct loss of over 30 billion euros. Now, the shadow of history is once again emerging, and industry analysts estimate that if chip supply cannot be restored in a timely manner, the European automotive industry may face economic losses of over 20 billion euros, and 100000 jobs are at risk. This crisis reminds us that in today's deeply integrated globalization, no enterprise can stand alone. Only by building a resilient, ecologically sound, and tightly coordinated supply chain system can we resist unknown risks. The pain of production cuts by core suppliers of Volkswagen and BMW should become an opportunity and driving force for the global automotive industry to restructure its supply chain.