Dusseldorf In the development of automated driving, Volkswagen has a long-term commitment to the US chip company Qualcomm. The automaker will use the “System-on-a-Chip” (SoC) developed specifically for automated driving from 2026 onwards on all brands around the world. The Handelsblatt found this out from corporate circles. Volkswagen declined to comment on the information.
After BMW and Mercedes-Benz, Volkswagen is the latest German automaker to engage in long-term chip cooperation. Like Volkswagen, BMW works with Qualcomm. Mercedes relies on Nvidia.
Wolfsburg’s decision comes as a surprise. In the industry, the Intel Mobileye subsidiary has so far been considered the favorite for a partnership with VW, as both companies have long collaborated on various driver assistance systems.
The contract with Qualcomm will last until 2031. The first chips will be delivered to VW in 2025. According to insiders, the volume of the contracts amounts to as much as one billion euros.
VW will install the automated driving software on the Qualcomm chip, which the automaker is currently developing together with Bosch. In a second step, the planned software for automated driving at the so-called level 4 should also run on the chip. At this level, vehicles can drive independently on the highway at any time.
The deciding factor for the deal is the pressure to innovate that Volkswagen and the entire auto industry are undergoing when it comes to connectivity and autonomous driving. According to business circles, Qualcomm is an “accelerator”. Thanks to the chips of the US group, the automaker can bring software developed with Bosch to the market more quickly.
This is a visit to San Diego
A few days ago, Volkswagen CEO Herbert Diess went to Qualcomm’s headquarters in San Diego, USA to sign the contract. There, Diess, along with Qualcomm CEO Cristiano Amon and Qualcomm Automotive chief Nakul Duggal, agreed on the terms of the future cooperation.
The fact that Diess personally flies to the United States for negotiations demonstrates the importance of cooperation for Europe’s largest carmaker and its CEO. For the 63-year-old, the agreement with Qualcomm is a success with a great signal effect. It can show critics that the future business with automated driving at the VW Cariad software unit is finally making headway.
Criticism of Diess and Cariad had recently increased within the group itself and outside. Since the beginning of the year, Diess has taken over the operational oversight of the software unit as VW chief. Together with the head of Cariad Dirk Hilgenberg, he develops the software strategy of the VW group. Now both are under special observation and the corresponding pressure to succeed.
Cariad has long been accused of not being able to respect the given timetables. Internally, in particular, the stamina of individual brands appears to be great. According to insiders, Stuttgart-based sports carmaker Porsche is not really convinced of the Cariad’s capabilities. As the software for the new models is not ready on time, their market launches are sometimes postponed. Even the vendors Cariad works with on software development are critical of the slow progress, as reported recently by Handelsblatt.
Cariad’s delays 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 in charge of the new software unit. The company says things are moving faster now.
Increasing competitive pressure
The fact that at least the question of the automated driving chip has now been clarified should give new impetus to further software development in the Volkswagen Group. The Wolfsburg-based producer doesn’t have much time to spare. Because in the light of competitors like Tesla and newcomers from China, like Xpeng or Nio, who are already entering the European market with complete software systems, the competitive pressure is enormous.
Volkswagen and other German manufacturers will have to catch up with automated driving software and car operating systems over the next two to three years to remain competitive. Volkswagen and Co. can only maintain this window if they get help from big chip companies with the hardware.
Autochips, in turn, are becoming increasingly important to the entire chip industry: their market share is expected to increase to 14% of the entire chip market by 2030, six percentage points higher than last year. . According to calculations by consulting firm McKinsey, revenues in this area will triple to approximately $ 160 billion by 2030.
Despite the continuing shortage of semiconductor supply, global autochip sales increased a whopping 28% to $ 52 billion in 2021.
>>> Read also: Herbert Diess is under pressure: criticism of the VW Cariad software unit is growing
Unlike BMW and Mercedes, VW is pursuing a particularly ambitious plan. While competitors from southern Germany are developing the automated driving software together with the respective chip companies, Volkswagen subsidiary Cariad is relying 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 with minimum power consumption can be obtained from the chip. This procedure is familiar from the smartphone world, where Apple uses its own chips for its iPhones, for example, which are customized for the respective software.
The chips that Volkswagen will purchase from Qualcomm for automated driving in the future have still been fully developed by the American IT group. But that is expected to change soon, the VW group wants to independently develop semiconductors to be able to use them in its vehicles as needed. The news can be expected this year, according to corporate circles over the weekend.
By choosing Bosch as a software partner, VW hopes to gain more control over development and increased sales. Critics say rival Mercedes, for example, entered into a “gag contract” when it decided to partner with Nvidia in terms of both hardware and software.
From 2024 onwards, when the first jointly developed systems hit the market from Mercedes, more than 40 percent of the revenue that Mercedes generates from software packages for automated driving functions will go to Nvidia.
Volkswagen also chose Qualcomm so as not to become too dependent. “Because unlike other chip makers, Qualcomm was the only company that offered us cooperation on an equal footing,” said a person familiar with what is happening at VW. Volkswagen’s contract with Qualcomm is not based on a “revenue sharing” model like Mercedes, but rather the Wolfsburg-based company pays per chip.
The deal should still be worth it for Qualcomm. Why semiconductors must be used in all VW Group vehicles around the world. The automaker currently sells nearly nine million cars a year and therefore has more market power than its competitor Mercedes, which delivered around 2.5 million vehicles in 2021.
>>> Read here, how increased use of software also accelerates vehicle development
However, Diess and Hilgenberg are facing difficult discussions within their own group. Above all, brands that previously developed their driver assistance systems based on other chip makers now have to adapt. This could particularly offend Audi developers. The Ingolstadt-based company has been working with Qualcomm competitor Nvidia for years.
As early as 2017, Audi and Nvidia had developed a system for the A8 luxury sedan that would have enabled level 3 automated driving. At this level, vehicles can drive autonomously on the freeway at low speeds for extended periods of time.
However, the feature was never activated because regulators did not cooperate. In 2020, Audi buried the project. Audi engineers will now have to switch to Qualcomm chips.
With the Qualcomm deal, Volkswagen has eliminated only the first of several hurdles. It is not yet clear which chip Volkswagen will use in high-performance computers for the future self-developed operating system. The automaker is currently negotiating this with all three major US suppliers: Nvidia, Qualcomm, and Intel.
With the upcoming car operating system, Volkswagen wants, among other things, to create the conditions for vehicles to communicate via the new 5G mobile communication standard. The planned operating system “VW.os” will also be used in all Volkswagen Group vehicles from 2026 onwards. Cariad is also responsible for the development of this operating system.
Moreover: Volkswagen and BP want to install 8,000 charging stations