Dusseldorf In the development of automated driving, Volkswagen is making a long-term commitment to the US chip company Qualcomm. The car manufacturer will use the “System-on-a-Chip” (SoC) specially developed for automated driving from 2026 onwards across all brands worldwide. The Handelsblatt found out from corporate circles. Volkswagen declined to comment on the information.
After BMW and Mercedes-Benz, Volkswagen is the last German car company to commit to a long-term chip cooperation. Like Volkswagen, BMW works with Qualcomm. Mercedes relies on Nvidia.
The decision of the Wolfsburg comes as a surprise. In the industry, the Intel subsidiary Mobileye has so far been considered the favorite for a cooperation with VW, since both companies have been cooperating on various driver assistance systems for a long time.
The contract with Qualcomm runs until 2031. The first chips will be delivered to VW in 2025. According to insiders, the contract volume amounts to a good one billion euros.
VW will install software for automated driving on the Qualcomm chip, which the car manufacturer is currently developing together with Bosch. In a second step, the planned software for automated driving at so-called Level 4 should also run on the chip. At this level, vehicles can drive independently on the highway at all times.
The decisive factor for the deal is the pressure to innovate that Volkswagen and the entire automotive industry are under when it comes to connectivity and autonomous driving. According to corporate circles, Qualcomm is an “accelerator”. Thanks to the chips from the US group, the car manufacturer can bring the software it developed with Bosch to market more quickly.
This is a visit to San Diego
A few days ago, Volkswagen CEO Herbert Diess traveled to Qualcomm’s corporate headquarters in San Diego, USA, to sign the contract. There, Diess, together with Qualcomm CEO Cristiano Amon and Qualcomm Automotive boss Nakul Duggal, agreed on the terms of future cooperation.
The fact that Diess flies personally to the USA for the negotiations shows the importance of the cooperation for Europe’s largest car manufacturer and its CEO. For the 63-year-old, the agreement with Qualcomm is a success with a great signal effect. He can show critics that the future business with automated driving at the VW software unit Cariad is finally making headway.
Criticism of Diess and Cariad had recently increased in the group itself and outside. Since the beginning of the year, Diess has taken over the operational supervision of the software unit as VW boss. Together with Cariad boss Dirk Hilgenberg, he works out the software strategy of the VW group. Now both are under special observation and the corresponding pressure to succeed.
For a long time, Cariad has been accused of not being able to keep to the given schedules. Internally, resistance from individual brands in particular seems to be great. According to insiders, the Stuttgart sports car manufacturer Porsche is not really convinced of the Cariad’s capabilities. Because the software for new models there is not ready in time, their market launches are sometimes postponed. Even suppliers with whom Cariad works on software development are critical of the sluggish progress, as the Handelsblatt recently reported.
Delays at Cariad are now openly acknowledged in Wolfsburg. There have been problems with various software projects over the past year. At that time, Audi CEO Markus Duesmann was still responsible for the new software unit. The company says things are moving faster now.
Increasing competitive pressure
The fact that at least the chip question for automated driving has now been clarified should give new impetus to the further development of the software in the Volkswagen Group. The Wolfsburg manufacturer doesn’t have much time left. Because in view of competitors such as Tesla and newcomers from China, such as Xpeng or Nio, who are already entering the European market with complete software systems, the competitive pressure is enormous.
Volkswagen and the other German manufacturers will have to catch up with the software for automated driving and the car operating systems in the next two to three years in order to remain competitive at all. Volkswagen and Co. can only keep to this time window if they get help from large chip companies with the hardware.
The world’s largest supplier makes a pact with VW for automated driving.
(Photo: Bosch)
Autochips, in turn, are becoming increasingly important for the entire chip industry: Their market share is expected to increase to 14 percent of the entire chip market by 2030, six percentage points more than last year. According to calculations by the management consultancy McKinsey, revenue in this area will triple to around 160 billion dollars by 2030.
Despite the ongoing supply shortages for semiconductors, global sales of autochips have skyrocketed by a good 28 percent to $52 billion in 2021.
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In contrast to BMW and Mercedes, VW is pursuing a particularly ambitious plan. While the southern German competitors are developing the software for automated driving together with the respective chip companies, the Volkswagen subsidiary Cariad relies on Bosch as a software partner. A few months ago, the VW Group and the world’s largest automotive supplier concluded a corresponding cooperation agreement.
According to the group, Bosch was therefore involved in the decision to buy chips from Volkswagen at Qualcomm. Because the jointly developed software must be closely coordinated with the hardware, i.e. the chip, so that maximum performance can be obtained from the chip with minimum power consumption. This procedure is familiar from the world of smartphones, where Apple uses its own chips for its iPhones, for example, which are customized for the respective software.
The competition in e-mobility presents the car manager with major challenges.
(Photo: Volkswagen AG)
The chips that Volkswagen will purchase from Qualcomm for automated driving in the future were still fully developed by the American IT group. But that should change soon, the VW group wants to develop semiconductors itself in order to be able to use them in its vehicles as required. News can be expected this year, according to company circles over the weekend.
By choosing Bosch as a software partner, VW hopes to gain more control over development – and higher sales. Critics claim that competitor Mercedes, for example, entered into a “gag contract” when it decided to cooperate with Nvidia in terms of both hardware and software.
From 2024 onwards, when the first jointly developed systems come onto the market at Mercedes, more than 40 percent of the income that Mercedes generates with software packages for automated driving functions will end up at Nvidia.
Volkswagen also chose Qualcomm so as not to become too dependent. “Because unlike other chip manufacturers, Qualcomm was the only company that offered us cooperation on an equal footing,” said one person with knowledge of what’s happening at VW. Volkswagen’s contract with Qualcomm is not based on a “revenue-sharing” model like Mercedes, but rather the Wolfsburg company pays per chip.
The deal should still be worthwhile for Qualcomm. Because the semiconductors are to be used in all vehicles of the VW Group worldwide. The carmaker currently sells almost nine million cars a year and thus has more market power than its competitor Mercedes, which delivered around 2.5 million vehicles in 2021.
>>> Read here, how the increased use of software also accelerates vehicle development
However, Diess and Hilgenberg are facing difficult discussions within their own group. Above all, brands that have previously developed their driver assistance systems on the basis of other chip manufacturers must now adapt. This could offend the developers at Audi in particular. The Ingolstadt-based company has been cooperating with Qualcomm’s competitor Nvidia for years.
As early as 2017, Audi and Nvidia had developed a system for the A8 luxury sedan that would allow level 3 automated driving. At this level, vehicles can drive independently on the motorway at low speeds for long periods of time.
However, the function was never activated because the regulatory authorities did not cooperate. In 2020, Audi buried the project. The Audi engineers will now have to switch to Qualcomm chips.
VW will cooperate with the US group in the future.
With the Qualcomm deal, Volkswagen has only cleared the first of several hurdles. It is still unclear which chip Volkswagen will use in the high-performance computers for the future self-developed car operating system. The car manufacturer is currently negotiating this with all three major suppliers from the USA: Nvidia, Qualcomm and Intel.
With the upcoming car operating system, Volkswagen wants, among other things, to create the conditions for vehicles to be able to communicate via the new 5G mobile communications standard. The planned operating system “VW.os” is also to be used in all vehicles from the Volkswagen Group from 2026 onwards. Cariad is also responsible for the development of this operating system.
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