A battle for control of a little-known chipmaker has threatened global auto production by disrupting the semiconductor supply chain, although there are signs the crisis is inching toward a resolution.
The power struggle over Nexperia, a Chinese-owned Dutch semiconductor manufacturer, underscores how technology supply chain vulnerabilities are affecting automakers, most notably forcing Honda to halt production at a Mexican factory that produces its popular HR-V crossover for North American markets.
It also exposes how Europe is caught in the middle of the wider geopolitical showdown between Washington and Beijing.
A surprise move
The turmoil erupted into public view in mid-October, when the Dutch government announced it had invoked a rarely used World War II-era law to take effective control of Nexperia weeks earlier.
The Dutch Ministry of Economic Affairs stated that it took action due to national security concerns.
Officials said they intervened due to “serious governance shortcomings” at Nexperia, asserting control to prevent the loss of crucial technological expertise that could threaten Europe’s economic security.
Nexperia’s Chinese owner Wingtech Technology, a partially state-owned company, is at the heart of the dispute.
Amid the boardroom battle, a Dutch court granted the ministry’s request to oust Nexperia’s Chinese CEO Zhang Xuezheng.
American officials told the Dutch government he would have to be replaced to avoid trade restrictions, according to a court filing.
What is Nexperia?
Nexperia manufactures simple semiconductors, including switches and logic chips. The automotive industry — one of Nexperia’s largest markets — utilizes its chips for various functions, including adaptive LED headlight controllers, electric vehicle battery management systems, and anti-lock brakes.
Headquartered in the Dutch city of Nijmegen, Nexperia was spun off from Philips Semiconductors two decades ago. It was eventually purchased by China’s Wingtech Technology in 2018 for $3.6 billion.
Nexperia has wafer fabrication plants in the United Kingdom and Germany. It operates an assembly and testing center in China’s southern manufacturing heartland of Guangdong, which accounts for around 70% of its end-product capacity, as well as similar centers in the Philippines and Malaysia.
Geopolitics
The dispute is part of the broader struggle between the U.S. and China over tech supremacy, which has left Europe caught in the middle.
It stems from 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’s subsidiaries, such as Nexperia, pressuring allies to follow suit.
After the Dutch government asserted control of Nexperia, Beijing responded soon after, blocking the export of Nexperia chips from its assembly plant in the Chinese city of Dongguan. It blamed the Netherlands for “turmoil and chaos” in the chip supply chain.
There were signs of hope following last month’s high-profile meeting between U.S. President Donald Trump and Chinese leader Xi Jinping, when the White House said Beijing would ease the export ban as part of a U.S.-China trade truce.
Despite Beijing also confirming exports would be allowed to resume, Nexperia’s Chinese unit said its headquarters had suspended shipments of wafers used to make chips to its Chinese factory, potentially crimping its ability to deliver finished products.
Nexperia’s head office responded in a statement on Wednesday, stating that the Chinese unit had refused to pay for the wafers and accused it of “ignoring the lawful instructions” from its global management team.
The company stated that it can’t guarantee the quality of any chips delivered from its China plant since October 13.
Auto disruption
Modern automobiles rely on so-called discrete chips made by companies like Nexperia, which, unlike more advanced microprocessors, perform a single function.
Leaders at major carmakers outlined their concerns during the latest round of earnings calls, stating that finding a replacement for Nexperia at scale in the short term will be challenging.
“While Nexperia makes up only about 5% of the automotive silicon discrete market in terms of revenue, its share is much higher in terms of discrete chip volume,” S&P Global Mobility analysts wrote in a recent note.
Nexperia’s parts are widely used across vehicle systems — often dozens to hundreds per vehicle — and carmakers in North America, Japan, and South Korea are at risk, they added.
“It’s an industrywide issue. A quick breakthrough is vital 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. The company has “teams working around the clock with our supply chain partners to minimize possible disruptions,” she said.
Nissan CEO Ivan Espinosa told CNBC that the company is setting aside a 25-billion-yen ($163 million) provision for supply risks, in part to “absorb” the impact from 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.
