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European automakers warn of production risks amid Dutch-China dispute over chipmaker Nexperia

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European carmakers are warning of potential production disruptions as a trade and technology dispute between China and the Netherlands over chipmaker Nexperia threatens to choke off the supply of critical automotive chips.

The European Automobile Manufacturers’ Association (ACEA) said on Thursday it was “deeply concerned” that Nexperia’s inability to guarantee chip deliveries could halt production at European factories. “Without these chips, automotive suppliers cannot build the parts and components needed to supply vehicle manufacturers,” ACEA said, urging an immediate resolution.

Nexperia, which supplies chips essential for vehicle electronics, told customers last week that deliveries could no longer be guaranteed. The company said it is engaging with Chinese authorities to obtain an exemption from export restrictions, but declined to give further details.

The dispute erupted after the Dutch government seized control of Nexperia on September 30, citing concerns over the possible transfer of technology to its Chinese parent company Wingtech, which is subject to U.S. export controls. Washington added Wingtech to its entity list in December, triggering restrictions that now extend to Nexperia under U.S. law.

In response, China’s commerce ministry imposed export controls on Nexperia China and its subcontractors, banning them from exporting certain chip components. The escalating standoff places Europe’s car industry in the crossfire of a widening U.S.-China tech war.

Nexperia’s chips are not high-end semiconductors but are produced in mass volumes crucial for car electronics. Major manufacturers including Volkswagen, BMW, Mercedes-Benz, and Stellantis, as well as suppliers like Bosch, said they are assessing risks and exploring contingency plans.

China’s commerce ministry criticized the Dutch government’s intervention, saying it “opposes interference in enterprises through administrative means” and vowed to protect Chinese companies’ rights.

Nexperia Parent Wingtech to Sell Electronics Arm Amid Geopolitical Shifts

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Wingtech (600745.SS), the Chinese company that owns European chip maker Nexperia, has announced plans to sell roughly half of its business, focusing more on chipmaking in response to changes in the geopolitical environment. This strategic move follows the company’s recent inclusion on the U.S. government’s “entity list,” which targets firms perceived to aid the Chinese government in acquiring sensitive chipmaking technology.

The sale will involve Wingtech’s “product integration” business, which includes contract manufacturing of smartphones, home appliances, and other electronics. Following the transaction, Wingtech intends to concentrate its efforts on strengthening its semiconductor division and solidifying its position as a leading global player in the power semiconductor sector.

The filing, submitted to the Shanghai Stock Exchange, did not disclose the price of the sale, but it revealed that the business to be sold accounts for between 50% and 60% of Wingtech’s revenues, although it represents no more than half of its total assets. Luxshare Ltd., a Hong Kong-based company that is also the controlling shareholder of Luxshare Precision Industry Co. (002475.SZ), an Apple supplier, will be the buyer of the business.

Nexperia, which Wingtech acquired in 2019, has stated that it does not anticipate any impact on its operations from being placed on the U.S. entity list, though they were not immediately available for comment on the sale.

 

Nexperia to Adhere to U.S. Restrictions on Parent Company Wingtech

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INTRODUCTION:
Dutch semiconductor manufacturer Nexperia has announced its commitment to comply with U.S. restrictions following the addition of its Chinese parent company, Wingtech, to the U.S. Department of Commerce’s “entity list.” The move aims to curb Wingtech’s access to critical U.S. technology amid concerns over its acquisition activities tied to chip manufacturing.

KEY DETAILS

  1. U.S. Restrictions and Wingtech’s Entity List Status:
    • Wingtech has been placed on the entity list, imposing strict licensing requirements for accessing U.S. technology.
    • The restrictions are designed to prevent technology transfers that could bolster defense capabilities for nations viewed as strategic adversaries.
  2. Nexperia’s Compliance:
    • A spokesperson for Nexperia clarified that the restrictions apply to Wingtech and do not directly affect Nexperia or its subsidiaries.
    • However, Nexperia will ensure full compliance with the restrictions, particularly concerning interactions with Wingtech.
  3. Nexperia’s Industry Role:
    • The company is a leading global producer of simple computer chips, including diodes and transistors.
    • Earlier this year, Nexperia expanded its operations in Hamburg, Germany, reflecting its strategic growth in Europe.
  4. Context of the Restrictions:
    • The U.S. Department of Commerce cited Wingtech’s attempts to acquire chip manufacturing technology crucial to the defense industries of the U.S. and its allies as the rationale for its decision.
    • This action aligns with broader efforts by the U.S. to limit China’s access to advanced technologies deemed essential for national security.

IMPLICATIONS

  1. For Nexperia:
    • While not directly impacted, Nexperia’s operational flexibility might face challenges due to heightened scrutiny of its parent company’s activities.
    • Continued compliance will be crucial for maintaining business relations in markets sensitive to U.S. regulations.
  2. For the Global Semiconductor Industry:
    • The restrictions underscore geopolitical tensions influencing semiconductor trade and technology flows.
    • Similar measures could impact other Chinese-linked entities, further fragmenting global supply chains.
  3. For U.S.-China Relations:
    • This move intensifies the ongoing technology war between the two nations, with semiconductors at the heart of the strategic rivalry.

CONCLUSION

Nexperia’s adherence to U.S. restrictions reflects the growing complexity of operating within a globally interconnected but geopolitically divided semiconductor industry. As regulatory pressures mount, the company’s ability to navigate these challenges will be critical to its sustained growth and market stability.