US-China trade clash over dutch chipmaker threatens global car production

CNN :

A little-known Dutch chipmaker, Nexperia, has become the center of a growing trade dispute that threatens to disrupt global car production and push vehicle prices even higher.

The company, which produces essential automotive components, is facing regulatory and geopolitical hurdles that could halt the supply of critical chips used in millions of vehicles worldwide.

Nexperia makes transistors, diodes, and other semiconductors vital for modern automobiles.

These chips control a wide range of vehicle functions, from adjusting seats and managing fuel injection to operating braking systems.

Without them, cars cannot be completed, making the chips as essential as engines or tires.

The company ships over 110 billion products annually and employs around 12,500 people across Europe, Asia, and the United States.

The current crisis stems from escalating U.S.-China trade tensions. In December, the U.S. Commerce Department placed Nexperia’s parent company, China-based Wingtech Technologies, on a list of companies subject to trade restrictions.

This October, China’s Ministry of Commerce banned Nexperia China and its subcontractors from exporting certain finished components and sub-assemblies manufactured in China.

In response, the Dutch government took control of Nexperia to safeguard European interests.

Industry leaders warn that the situation could trigger widespread auto plant shutdowns.

“If the shipment of automotive chips doesn’t resume – quickly – it’s going to disrupt auto production in the U.S. and many other countries and have a spillover effect in other industries,” said John Bozzella, CEO of the Alliance for Automotive Innovation, a lobbying group representing most major automakers.

The European Automobile Manufacturers Association echoed these concerns, noting that finding alternative suppliers would take months, while current chip supplies may last only weeks.

“Automakers have taken steps over the last years to diversify supply chains, but risk cannot be mitigated down to zero,” said Sigrid de Vries, the association’s director general.

“We suddenly find ourselves in this alarming situation. We really need quick and pragmatic solutions from all countries involved.”

Nexperia accounts for approximately 40% of automotive chips in the market segment that includes transistors and diodes, according to Ian Riches, vice president of the global automotive practice at research firm TechInsights.

The disruption could resemble the chip shortage seen during the pandemic, which forced temporary plant shutdowns and caused a significant drop in the supply of new vehicles for more than a year.

That shortage, in turn, drove up prices for both new and used cars.

Automakers are already facing rising costs due to tariffs imposed in recent years, and while many companies have absorbed some of these costs, consumer prices are rising.

Kelley Blue Book recently reported that the average U.S. new car price has surpassed $50,000 for the first time.

Nexperia, meanwhile, says it is working on business continuity plans and remains “confident that a solution will be found.” Still, automakers are urging swift action to prevent the disruption of production lines that could affect millions of vehicles globally.