The global automotive industry is facing a new crisis, this time centered on a Dutch chipmaker with Chinese ownership. The recent takeover of Nexperia by the Dutch government has sent shockwaves through the industry, exposing the vulnerabilities of global supply chains and escalating the tech rivalry between the US and China. This article delves into the heart of the Nexperia saga, examining the geopolitical chess game, the weaponization of supply chains, and the far-reaching consequences for car manufacturers worldwide.
The Dutch Government's Bold Move
In a move that has been described as “highly exceptional,” the Dutch government invoked a Cold War-era emergency law to seize control of Nexperia, a chip company owned by China’s Wingtech Technology. The government cited “serious governance shortcomings and actions within Nexperia” as a threat to the continuity of supply and the safeguarding of critical technologies for the Dutch and European economies. 1
Beijing’s reaction was swift and furious. Accusing the Netherlands of political interference, China imposed export controls and halted deliveries of Nexperia chips from its Chinese facilities to Europe. This move highlighted a critical weakness in the global supply chain, as a significant portion of Nexperia’s output is processed in China.
The Weaponization of Supply Chains
Nexperia is a key player in the semiconductor ecosystem, producing “legacy” or “building block” chips that are essential for a wide range of automotive functions, from power steering and airbags to central locking systems. While not at the cutting edge of chip technology, these components are indispensable, with some vehicles containing hundreds of them. 1
The Nexperia dispute underscores China’s ability to leverage its control over supply chains as a geopolitical weapon, similar to its dominance in the rare earth minerals market. This has raised concerns about “digital sovereignty” and the West’s reliance on China for critical components.
“Car markers blindsided by the Nexperia mess should be hiring new supply chain management executives, as they clearly learned nothing from Covid… and excessive reliance on [Chinese] supply chains,” commented China watcher Bill Bishop in his Sinocism newsletter. 1
National Security Concerns and the US-China Tech War
The Nexperia saga is also deeply intertwined with the ongoing tech war between the US and China. Wingtech, Nexperia’s parent company, is on a US watch list, and its founder, Zhang Xuezhen, has been suspended by a Dutch court for mismanagement. 1
Documents released by the Dutch authorities suggest that US officials had raised concerns about Nexperia’s leadership and that a change in management could lead to an exemption from the US entity list. The Hague, however, denies that the takeover was a response to foreign pressure, stating that there was evidence of the company’s resources and intellectual property being transferred to China. 1
The Ripple Effect on the Automotive Industry
The disruption caused by the Nexperia dispute has left the global automotive industry on edge. While it is possible to switch to other chip suppliers like Infineon, NXP, or Texas Instruments, supply chains are complex and evolving, and many components are custom-made for specific vehicles. The cost and complexity of changing suppliers are significant, and the industry is now grappling with the very real consequences of decoupling from China.
A Fragile Truce
The Nexperia controversy comes at a time of a fragile trade truce between the US and China. While the two superpowers have agreed to suspend some export bans and restrictions, the Nexperia dispute suggests that the underlying tensions remain. The EU is now in urgent negotiations with China to lift the export controls on chips and rare earths, seeking a “lasting, stable, predictable framework” to ensure the free flow of semiconductors. 1
The Nexperia saga serves as a stark reminder of the vulnerabilities in our globalized world. The battle over this single chipmaker has exposed the intricate web of dependencies that underpin the global economy and the profound impact that geopolitical tensions can have on industries and consumers alike.
References
[1] Nexperia: Battle over Chinese chip maker rocks global car industry
