A dispute over control of Nexperia, a Chinese-owned Dutch chipmaker, which disrupted the semiconductor supply chain to the point of threatening international auto production, may be nearing resolution. The power struggle brought into focus weak links in the technology supply chain, forcing Honda to halt production at a Mexican factory where it makes HR-V crossover vehicles for North American markets and left Europe caught in the middle of a showdown between Washington and Beijing.
The dispute went public in mid-October, when the Dutch government declared it had invoked a rarely used law dating from the Second World War era to take effective control of Nexperia some weeks prior for reasons of national security. Officials from the Ministry of Economic Affairs said they had done so due to “serious governance shortcomings” at Nexperia, claiming they had been forced to act to prevent the loss of vital tech know-how that might threaten Europe’s economic security.
Nexperia’s Chinese owner Wingtech Technology, a partially state-owned company, is at the core of the boardroom dispute, which was triggered by a Dutch court’s decision to grant the ministry’s request to oust Nexperia’s Chinese CEO Zhang Xuezheng. U.S. officials had informed the Dutch government he would have to be replaced to avoid trade restrictions, according to a court filing.
Nexperia makes simple semiconductors such as switches and logic chips, which the auto industry (one of Nexperia’s main customers) requires for functions ranging from LED headlight controllers and electric vehicle battery management systems to anti-lock brakes.
With headquarters in the Dutch city of Nijmegen, Nexperia was spun off from Philips Semiconductors two decades ago and eventually purchased by China’s Wingtech Technology in 2018 for $3.6 billion. The company has wafer fabrication plants in the U.K. and Germany. It operates an assembly and testing centre in Guangdong, China’s southern manufacturing heartland, which accounts for some 70% of its end-product capacity — plus similar centres in the Philippines and Malaysia.
The dispute reflects a broader struggle between the U.S. and China over tech supremacy, which has left Europe caught in the middle, all because of Washington’s decision late last year to place Wingtech on its “entity list”, which subjects companies to export controls because of national security risks. In late September, the U.S. expanded the list to include Wingtech subsidiaries, such as Nexperia, pressuring allies to follow suit.
Shortly after the Dutch government asserted control of Nexperia, Beijing blocked the export of Nexperia chips from its assembly plant in the Chinese city of Dongguan, blaming the Netherlands for “turmoil and chaos” in the chip supply chain.
Hopes were raised after last month’s high-profile meeting between U.S. President Donald Trump and Chinese leader Xi Jinping that Beijing would ease the export ban as part of a U.S.-China trade truce. Instead, Nexperia’s Chinese unit subsequently announced that, at the direction of company headquarters, it was suspending shipments of the wafers used to make chips to its Chinese factory, a setback for its ability to deliver finished products.
However, a statement issued by Nexperia’s head office in the middle of last week said the Chinese unit had refused to pay for the wafers and accused it of “ignoring the lawful instructions” from its global management team. Accordingly, the company indicated it could not guarantee the quality of chips delivered from its China plant post-October 13th.
Modern automobiles rely on so-called discrete chips made by companies like Nexperia. Leaders at big carmakers say finding a replacement for Nexperia at scale in the short-term will be difficult.
“While Nexperia makes up only about 5% of the automotive silicon discrete market in revenue terms, its share is much higher in terms of discrete chip volume,” according to S&P Global Mobility analysts. Because Nexperia’s parts are widely used in multiple vehicle systems, carmakers in North America, Japan, and South Korea are at risk, they added.
“It’s an industry wide issue. A quick breakthrough is really necessary to avoid fourth quarter production losses for the entire industry,” Ford CEO Jim Farley said. General Motors CEO Mary Barra warned that production could be hit.
Nissan CEO Ivan Espinosa told CNBC that the company is setting aside 25 billion yen ($163 million) to cover supply risks, in part to “absorb” the potential impact of the Nexperia crisis on production. Mercedes-Benz is “scurrying around the world to look for alternatives,” CEO Ola Kallenius said. The European Automobile Manufacturers’ Association said members including BMW, Renault, Volkswagen and Volvo have been forced to use their reserve stockpiles of chips and warned of assembly line stoppages if they run out.
European Union Trade Commissioner Maros Sefcovic (Maroš Šefčovič), was more upbeat, writing on X that China’s Commerce Ministry had confirmed “further simplification” of export procedures for Nexperia chips to the EU and global customers.
In Beijing, Saturday, the Commerce Ministry said it had agreed to a Dutch request to send representatives to China for “consultations” but noted that the Netherlands had yet to take steps to restore the global semiconductor supply chain despite the Dutch government having indicated days earlier that it would take “appropriate” measures as needed.
A statement by Dutch Economics Affairs Minister Vincent Karremans said that “the Netherlands trusts that the supply of chips from China to Europe and the rest of the world will reach Nexperia’s customers over the coming days.”
Honda has received word that Nexperia’s shipments from China have resumed. Executive Vice President Noriya Kaihara told reporters late last week that the Japanese automaker expects to resume production during the week of 21 November at its plant in Celaya, Mexico, which can make up to 200,000 vehicles a year.
This article used information from The Associated Press
