China-Dutch chip clash puts Europe’s carmakers on the brink

European automakers are confronting one of their greatest supply chain risks since the pandemic began. A growing row between China and the Netherlands over the Dutch chipmaker Nexperia has put the continent’s car production at ￰0￱ leaders have also warned that the row could bring assembly lines to a standstill across Europe if it is not resolved ￰1￱ crisis was triggered after the Dutch government announced it would take over Nexperia, a semiconductor firm based in Nijmegen that China’s Wingtech Technology fully ￰2￱ move, announced on October 12, was described as “exceptional” and aimed to safeguard national security and technological ￰3￱ Netherlands stated that it took the action out of concern that Nexperia’s technology could fall into its Chinese parent company’s hands and be modified without ￰4￱ action followed months of pressure from Washington, which had warned European allies about the security risks associated with Chinese ownership in key technology ￰5￱ court filings, which went largely unnoticed at the time, ￰6￱ had privately pressured Dutch regulators to oust the Chinese leadership of Nexperia and tighten ￰7￱ came on top of new American export control rules that expanded restrictions to subsidiaries 50% or more owned by sanctioned Chinese ￰8￱ last year, Wingtech was placed on the U.

S. “entity list,” effectively severing its access to American chipmaking equipment and ￰9￱ didn’t take long to ￰10￱ October 4, before the Dutch announcement but as tensions were escalating, China’s Commerce Ministry issued an order preventing Nexperia China and its subcontractors from exporting certain finished products and sub-assemblies manufactured in ￰11￱ a statement, Nexperia said it was in discussions with officials in China regarding an exemption and was working with its European clients to mitigate the ￰12￱ scramble to contain fallout Once again, the European automotive industry finds itself at the center of a global trade and technology ￰13￱ European Automobile Manufacturers’ Association (ACEA) warned that if deliveries of the Nexperia chip were to cease, parts of Europe’s car production may shut down.

Nexperia’s chips are critical to rudimentary automotive systems — everything from sensors and lighting to braking controls and battery ￰14￱ its customers are Volkswagen, BMW, Mercedes-Benz, Stellantis, and ￰15￱ week, Nexperia informed several customers that it would no longer be able to guarantee delivery ￰16￱ announcement set off emergency reviews across the sector. Volkswagen, which does not yet count among companies suffering production delays, said it’s monitoring the situation ￰17￱ said that some of its supplier network is already feeling the effects, and they are in active conversations with their partners to ensure stability. Bosch, one of Europe’s largest providers of auto parts, cautioned that even short-term disruptions could send shock waves through the supply chain.

Stellantis, whose brands include Peugeot, Fiat, and Opel, stated that it is collaborating with Nexperia and other suppliers to assess the potential implications and develop contingency ￰18￱ brace for a new chip shortage Europe’s carmakers are bracing for a ￰19￱ industry is still recovering from the 2021–2023 semiconductor shortage, which resulted in tens of billions of dollars in losses and led to plants halting or suspending ￰20￱ caution that this standoff could lead to similar chaos, but this time, it would be geopolitical rather than ￰21￱ Zhang, the company’s chief executive, has even gone so far as to say that systems designed by Nexperia are responsible for 10 percent of the world’s electricity consumption — all by making transistors that can switch off rapidly but don’t turn on particularly ￰22￱ in Germany, France, and Italy would be most affected by this, as many of their suppliers rely on just-in-time delivery of chips from Nexperia.

Europe’s chipmaking ecosystem is fragile ￰23￱ efforts have been made to increase local production under the EU Chips Act, much of the packaging and assembly work continues to occur in Asia, particularly in ￰24￱ you're reading this, you’re already ￰25￱ there with our newsletter .