A governance dispute within a semiconductor company in Europe has created a crisis in the global auto industry. A battle for control of the Chinese-owned chip manufacturing company, Nexperia, in the Netherlands has disrupted the supply of crucial parts to vehicle manufacturers worldwide. As a result, Honda in Japan had to halt production at one of its key plants in Mexico. This issue in the Netherlands initially began as a governance-related dispute.
According to the Associated Press (AP), this crisis came to light in mid-October. The Dutch government used a rare law from the World War II era, citing national security concerns, to take effective control of Nexperia. The Ministry of Economic Affairs stated that it took action to prevent serious governance deficiencies that could pose a risk of Europe’s technical expertise falling into foreign hands. This move pushed Nexperia’s Chinese owner, Wingtech Technology, to the sidelines and forced a Dutch court to remove the Chinese CEO, Zhang Zuezheng, from his position. Wingtech Technology has some level of government stake.
The U.S. and China Factor in the Netherlands’ Crisis
The situation took an interesting turn when U.S. officials reportedly informed the Netherlands that it was necessary to remove Zhang to avoid American trade restrictions. This intervention placed the Netherlands in a diplomatic crisis, caught between America’s security demands and China’s economic retaliation. This entire drama is a part of the broader technology rivalry between the U.S. and China. Last year, the U.S. added Wingtech to its trade blacklist.
By the end of September, these sanctions had extended to Wingtech’s subsidiaries, including Nexperia. The U.S. also pressured allies like the Netherlands. After the Netherlands took control of Nexperia, China retaliated by halting exports of Nexperia chips from its Dongguan plant and accusing the Dutch of causing disruptions and chaos in the global supply chain. Amidst all this drama, car manufacturers scrambled to find alternatives, and Europe suddenly found itself caught between security partners and its industrial dependence on China.
What Does Nexperia Actually Do?
Nexperia is not an attractive chip maker like Nvidia or TSMC. It manufactures simple yet essential discrete semiconductors, switches, diodes, and logic chips. These are critical components for everything from EV battery systems and adaptive LED headlights to anti-lock braking systems. Nexperia is headquartered in Nijmegen, Netherlands. The company was separated from Philips Semiconductors two decades ago, and in 2018, Wingtech acquired it for approximately $3.6 billion. It has fabrication plants in the UK and Germany, testing and assembly centers in the Philippines and Malaysia, and a major production hub in Guangdong, China, where nearly 70% of its production takes place.
How Critical Are Nexperia’s Chips?
Modern vehicles depend heavily on the types of chips Nexperia manufactures. According to analysts from S&P Global Mobility, while Nexperia holds only about 5% of the global automotive chip revenue, its volume share is much higher. This means that without Nexperia’s chips, assembly lines could come to a halt. An example is Honda, which had to stop production at its Celaya plant in Mexico. This plant manufactures around 200,000 HR-V crossovers annually for the North American market.
According to AP, Mary Barra of General Motors stated that her company’s teams are working “around the clock” with suppliers to minimize disruptions. Nissan has set aside ¥25 billion (about $163 million) to address potential supply component shortages. European car manufacturers are also feeling the pressure. Mercedes-Benz CEO Ola Källenius acknowledged that his teams are racing around the world to find backup suppliers. The European Automobile Manufacturers Association (ACEA) stated that companies like BMW, Renault, Volkswagen, and Volvo are now using reserve chip stockpiles, though this is a temporary solution.
Is There Any Hope for a Resolution?
Some hope emerged after a meeting between U.S. President Donald Trump and Chinese President Xi Jinping. The two countries agreed to work on resolving their trade war, including easing restrictions on chip exports. According to AP, Dutch Minister for Economic Affairs, Vincent Karemans, expressed confidence that shipments from China to Europe will resume in the coming days. Honda also confirmed that it has received confirmation of the resumption of Nexperia chip exports from China. The company plans to restart production at its Mexico plant during the week of November 21.
