Nexperia wake-up call: Reliance on Chinese chips nearly froze global auto production

The Nexperia dispute has shaken the global supply chain. According to Reuters, the incident has highlighted China’s considerable leverage in the global chip ecosystem, particularly across the mid- and low-end segments. It has also exposed the vulnerabilities of the automotive and industrial supply chains. The following shows how this reliance can trigger outsized disruption and how firmly China’s influence extends throughout the supply chain.

Currently, Wingtech Technology, the Chinese owner of Nexperia, says it has received no meaningful response after contacting the Dutch chipmaker’s headquarters for discussions. As noted by South China Morning Post, Wingtech emphasizes that although the Dutch government has paused its intervention in Nexperia, a ruling by the Dutch Enterprise Chamber that stripped Wingtech of shareholder control and removed Nexperia CEO Zhang Xuezheng remains in effect.

Dependence on cheap Chinese chips nearly halts global production
Nexperia’s chips were seen as so cheap and readily available that most European automakers did not normally prepare alternative supplies. Bosch also lacked sufficient backup options, despite ordering 200 million euros (USD 231 million) worth of Nexperia products annually, the Reuters report points out, citing sources.

Reuters highlights that China allowed some Nexperia exports to resume after U.S. President Donald Trump met with China’s Xi Jinping in Seoul—a move that came just in time for Bosch and suppliers Aumovio, ZF Group, and Hella, which were only days away from halting parts of their production.

Nexperia China plant shift to Yuan sparks distribution snags
Meanwhile, a notable development was Nexperia’s decision to require payment in yuan instead of the foreign currencies it had previously accepted when it resumed sales to some domestic distributors in late October. Reuters notes that this shift in currency policy appeared to be an effort by the company’s Chinese operations to operate more independently from its Dutch headquarters.

Sources cited by Reuters say that ready-to-ship chips accumulated at Nexperia’s Dongguan plant because the facility was unable to process all yuan-denominated transactions. Austria’s Melecs and Apple supplier JABIL have managed to obtain chips from Nexperia by purchasing through Chinese entities, which allowed them to settle payments in yuan.

Why diversifying chip supply remains difficult and costly task?
Another reason the Nexperia dispute has had such a large impact on the supply chain is that Nexperia chips are widely used in components like power modules and are often soldered directly onto them. This makes replacement difficult because they cannot simply be swapped out, as Reuters points out.

Any new vehicle component must undergo testing, which can add months to the process of qualifying alternative parts. The report also indicates that even as the chip industry talks about strengthening resilience and broadening supply sources, getting ready for potential bottlenecks will be difficult and costly.

-- Source: TrendForce, Taiwan.