The dispute between the Netherlands and China over semiconductor maker NXP (formerly Nexperia) is very much alive and escalating. It has moved from a governance dispute into a real supply-chain risk scenario.
Nexperia’s China unit has publicly declared it will operate independently of the Dutch headquarters, saying Chinese site staff should ignore instructions from the Dutch HQ and follow local management instead.
While the Dutch government formally took control of Nexperia under its emergency ‘Goods Availability Act’, Dutch Economy Minister Vincent Karremans said on October 19th that he expected to have a meeting with a Chinese government official within days to solve the dispute.
Significant supplier disruption?
Full-scale production stoppages in the auto sector are not yet widespread, but the pieces are in place for significant disruption unless a resolution is found quickly. BMW acknowledged that parts of its supply network have already been affected, though production continues for now.
Mercedes-Benz and Renault both said they are monitoring the situation but declined to provide details, with Renault noting it is too early to make a definitive statement.
Volkswagen Group has formed a task force to evaluate risks across its vast supplier base. At the same time, Stellantis said it is collaborating with Nexperia and other partners to assess and mitigate potential impacts.
Industry giant Bosch, a direct Nexperia customer, confirmed it is in contact with the chipmaker and working to minimize any disruptions. Together, the responses underscore how deeply the standoff between the Dutch-controlled Nexperia and China is rippling through Europe’s auto supply chain.
Cold-War era scenario
This time, politics is at the root of the problem. Last week, the Dutch government invoked a Cold War-era national security law to seize control of Nexperia, a former Philips subsidiary acquired in 2018 by China’s Wingtech Technology.
Officials in The Hague stated that the move was necessary to safeguard access to vital technologies and prevent sensitive knowledge from being transferred to the Chinese parent company. Behind the screens, the Dutch government seems pushed by the White House, which is continuously entangled in a trade dispute with China.
Cutting the lifeline
Beijing retaliated. It banned exports from Nexperia’s Chinese factories, effectively cutting off half of the company’s global output. However, as Europe’s vehicle manufacturers widely use these inexpensive chips, it’s cutting off their lifeline to their production networks.
On Thursday, ACEA, the European automakers’ association, issued an unusually sharp statement this week warning of “severe disruptions” to production if the dispute isn’t settled swiftly.
The group said members were informed by Nexperia one week ago that it could no longer guarantee chip deliveries. “Without these semiconductors, suppliers can’t build the parts automakers rely on,” ACEA Director General Sigrid de Vries said. “This affects nearly every manufacturer in Europe.”
Low-cost chips
Nexperia specializes in low-cost, high-volume chips — often priced below €1 — that perform basic but indispensable functions, such as managing switches, sensors, and steering controls.
An average European car contains between 350 and 500 of them. Six out of ten chips Nexperia produces are destined for automotive use, making it one of the continent’s most critical, if often overlooked, suppliers. So, automakers are hastily assessing their exposure.
A stress test?
The timing could hardly be worse. After spending years recovering from the semiconductor shortage triggered by the pandemic, European automakers now face another potential production freeze.
The previous crisis lasted two years and significantly impacted lead times for new cars and second-hand pricing. It cut more than 10 million cars from the planned global output. Some vehicles were even shipped with comfort items like seat-heating or touchscreens omitted.
The industry vowed to become less dependent on globalization and less reliant on dominant supplier strategies. At best, Nexperia could result in a stress test to see whether automakers took the proper measures afterward.
Analysts say alternative chip suppliers exist, but switching is neither quick nor straightforward. Each component must be revalidated and tested to meet safety and performance standards, a process that can take months.
Even then, ramping up production elsewhere won’t offset Nexperia’s lost capacity overnight. The industry hopes that diplomatic talks can ease the standoff before supply lines dry up.
