Procuring electronics and semiconductors in a changing environment: a study of automakers’ procurement strategies to secure supply, cost and innovation

Licentiate thesis, 2024

The automotive industry is undergoing a transformation that is fueled by automation, connectivity, and electrification. Automotive original equipment manufacturers (OEMs) have and continue to become increasingly dependent on electronic and semiconductor components (SEC), in a changing environment characterized by increasing legal regulations, rapid technological development, and susceptibility to natural disasters. These factors present challenges for OEMs and their procurement to secure the needed supply, cost, and innovation of SEC. An example of these challenges is the semiconductor shortage crisis (2021–2023), which caused production stops and increased component costs for several OEMs. Looking ahead, concerns about supply and cost are accompanied by an increasing need to access innovations that enable new, advanced vehicle functions.

This thesis takes the perspective of automotive OEMs and investigates how, through their procurement, they can improve their position in the supply network to secure supply, cost, and innovation of SEC. To achieve this aim, this thesis adopts a case study of an automotive OEM’s SEC supply network. Adopting a case study method allowed the exploration of the context of the automotive SEC supply network, including the relationships, the dependences between actors, and the influence of internal and external factors.

This thesis combines the findings of three papers and shows the growth of the SEC supply network as a Tier 1-centric network, marked by local power imbalances and disconnection between upstream and downstream actors, which weaken the power position of OEMs. On the other hand, procurement approaches to secure innovation and supply through interactions across the supply network, including direct connections with semiconductor suppliers, improve the OEMs’ power position. The findings contribute to our understanding of the automotive SEC supply network and of the role of procurement in improving buying firms’ position to secure multiple procurement objectives in decision-making environments marked by rapid change.