Nexperia, a European automotive chip manufacturer embroiled in a geopolitical dispute, has halted supplies to its factory in China, escalating a trade war that threatens global automotive production. The company notified its customers this week of the suspension, which is a direct response to recent payment compliance issues with local management at the Chinese plant.
The Dutch government had previously intervened in September by taking control of Nexperia, citing national security concerns about its Chinese owner, Wingtech Technologies, potentially transferring intellectual property to another firm it controls. This decision led to the removal of Wingtech’s chairman, Zhang Xuezheng, from his CEO position at Nexperia.
In retaliation, China enforced restrictions ceasing all exports from Nexperia’s plants in the country. This ban has raised alarms among Europe’s carmakers, who fear that continued disruptions could force production lines to shut down within days. Nexperia plays a crucial role in the semiconductor supply chain, manufacturing components essential for various automotive functions. Many of its products, especially wafers produced in Europe, are shipped to China for packaging and distribution.
Nexperia’s interim CEO, Stefan Tilger, indicated that shipments were paused due to “a direct consequence” of failing to meet agreed contractual payment terms. However, he expressed hope for a resolution and the possibility of resuming shipments if payments are made. In the meantime, Nexperia will continue operations at a smaller facility in Malaysia.
The automotive sector is already grappling with semiconductor shortages exacerbated by the COVID-19 pandemic, impacting not just advanced chips but also the less expensive power control chips manufactured by Nexperia. The company typically ships over 100 billion components annually, vital for functions such as airbags and central locking systems.
While Nissan has reported sufficient chip supplies until early November, other manufacturers like Honda and Volkswagen are facing immediate challenges. Honda has halted production in Mexico, and Volkswagen has warned that its profit targets are at risk without sufficient chip supplies. In contrast, Toyota has claimed it currently does not anticipate significant supply issues.
Attention is also directed towards diplomatic discussions between the EU and China, as EU Trade Commissioner Maroš Šefčovič aims to address China’s ban on Nexperia and restrictions on rare earth minerals. The EU is considering legislative measures, following insights from meetings with Nexperia’s leadership, highlighting the need for better visibility of chip inventories, increased investment in chip manufacturing, and reserve stockpiling.
The German Association of the Automotive Industry (VDA) has expressed concerns about potential production restrictions and stoppages unless the ongoing issues with Nexperia are resolved. British operations could also be impacted, particularly since Nexperia manufactures chip wafers in Manchester, originally established by Philips. Notably, Nexperia’s acquisition of a UK factory was blocked due to national security concerns tied to its Chinese ownership.
Despite the challenging landscape, the hope remains for a resolution that will enable the semiconductor supply chain to stabilize and continue supporting the automotive industry’s recovery and growth through the coming months.