Despite initial intentions to protect the European auto industry, the Dutch government's move to take control of chipmaker Nexperia has backfired, potentially leading to a new, acute shortage of semiconductor components. Tensions between the Dutch parent company and its Chinese subsidiary, which has been owned by Wingtech Technology since 2017, have escalated, leading to a ban on exports from China.
Chinese export ban isolates automakers
About 80% of Nexperia's products are processed in China, where key steps such as testing and packaging of silicon wafers take place. After Chinese authorities banned the export of these local products, automakers outside China suddenly found themselves with limited access to a critical range of semiconductor components.
Although Nexperia's share of the overall automotive electronics market is only 5%, the company is a leading supplier of certain electronic components and has significant influence on the global market. Nexperia's main customers include giants such as BMW, Mercedes-Benz and Volkswagen.
ACEA warns: Chips will last for weeks
The European Automobile Manufacturers' Association (ACEA) has warned that the Nexperia chips currently available in Europe will last for only a few weeks. This brings back nightmare memories for market participants from 2021, when the pandemic led to massive semiconductor shortages and production plans to collapse.
Market participants are deeply concerned that predicting future supplies from Nexperia will be extremely difficult. Some of the company’s components are now available for order in just a few months. To further exacerbate the crisis, Nexperia’s subsidiary in China is preparing to switch to a four-day workweek.
Major automakers are already taking action. Volkswagen has formed a task force to address potential problems. BMW and Stellantis are also working with their suppliers to assess the extent of the crisis. In contrast, American automakers started looking for alternatives earlier and are believed to be better protected.
Geopolitics, prices and alternatives
The management of China’s Wingtech has justified keeping products on the domestic market with export control requirements, while unofficial sources point to pressure from US authorities on the Dutch government. The Dutch and Chinese economy ministers are planning urgent talks on the matter.
Meanwhile, geopolitical tensions are already having concrete market consequences. According to TrendForce, Taiwanese chipmakers are seeing a surge in orders from the automotive sector. As a result, lead times for certain semiconductor components have already increased to three months, and prices are expected to jump by at least 5% to 20% this quarter.
The automotive industry is facing a new test of endurance, and its success will depend on how quickly it can find alternative suppliers and reorganize its supply chains.