The US-China Trade Dispute Over Little-known Dutch Chipmaker

Few car buyers have heard of Nexperia. But this Dutch company makes chips that are essential for making cars – and now, it’s at the center of a trade dispute that could shutter global auto plants and send already-record-level car prices even higher. 

The dispute is just one part of wider trade tensions between the United States and China. The Nexperia saga began in earnest this past December when the US Commerce Department put Nexperia’s parent company, China-based Wingtech Technologies, on a list of companies facing trade restrictions. 

Then, on October 04, China’s Ministry of Commerce banned Nexperia China and their sub-contractors from exporting specific finished components and sub-assemblies manufactured in China. The Government of the Netherlands reported on October 12 that they took control of Nexperia following this move, citing worries about the possible transfer of technology to Nexperia's Chinese parent company. 

The tensions have prompted concerns of possible auto plant shutdowns, since the chips Nexperia makes are critical to the assembly of the cars and trucks in which they’re installed. 

The fear is that the trade dispute could halt Nexperia’s production of the chips, and it would be difficult to replace them. When and if auto plants might be forced to halt operations is not clear. 

But a similar chip shortage following the pandemic caused temporary plant shutdowns and the supply of new autos to drop significantly for more than a year. That shortage in turn helped drive up the price of both new and used cars. 

Vehicles have become more dependent on computer chips, transistors and diodes on everything from adjusting driver’s seats to feeding the proper amount of fuel into engines and providing braking power. Vehicles can’t be completed if those critical components are unavailable. 

While Nexperia is little known outside the industry, their website says the company have more than 6,000 products qualified for use in automobiles, and shipments of 110 billion of their products annually. They have 12,500 employees across Europe, Asia and the United States. And they claimed they're working on business continuity plans and is “confident that a solution will be found”. 

But automaker trade groups are less confident and have sounded the alarm of possible auto plant shutdowns. 

“If the shipment of automotive chips doesn’t resume – quickly – it’s going to disrupt auto production in the US and many other countries and have a spillover effect in other industries”, John Bozzella, CEO of the Alliance for Automotive Innovation, a lobbying group for most major automakers, said in a statement. “It’s that significant. We’re urging a quick resolution, so US and global automaking remains on track”. 

The European Automobile Manufacturers Association said it would take months to get new supplies of the components their members have been getting from Nexperia, while the supply of their chips is expected to last only weeks. 

“Automakers have taken steps over the last years to diversify supply chains but risk cannot be mitigated down to zero. This is a cross-industry issue affecting a large number of suppliers and virtually all of our members”, Sigrid de Vries, director general of the European associations, said in a statement. 

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

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

Automakers are already being forced to deal with increased costs due to tariffs being imposed by the US administration. While many are absorbing the costs so far, Kelley Blue Book, a US vehicle valuation and automotive research company, had come out with an estimate that the average US new car price just topped $50,000 for the first time.