A crisis at chipmaker Nexperia sent automakers scrambling. Here’s what to know

A battle for control of a little-known chipmaker has threatened global auto production by choking off the semiconductor supply chain though there are signs the emergency is inching toward a resolution The power struggle over Nexperia a Chinese-owned Dutch semiconductor maker highlights how device supply chain vulnerabilities are squeezing auto makers bulk notably forcing Honda to halt production at a Mexican factory making its popular HR-V crossover for North American markets It also exposes how Europe is caught in the middle of the wider geopolitical showdown between Washington and Beijing Here s a look at the dispute A surprise move The turmoil erupted into citizens view in mid-October when the Dutch authorities informed it had invoked a rarely used World War II-era law to take effective control of Nexperia weeks earlier The Dutch ministry of economic affairs noted it took action because of national safeguard concerns Bureaucrats commented they intervened because of serious governance shortcomings at Nexperia asserting control to prevent the loss of crucial tech know-how that could threaten Europe s economic shield Nexperia s Chinese owner Wingtech Equipment a partially state-owned company is at the heart of the dispute Amid the boardroom battle a Dutch court granted the ministry s request to oust Nexperia s Chinese CEO Zhang Xuezheng American administrators notified the Dutch ruling body he would have to be replaced to avoid deal restrictions according to a court filing What is Nexperia Nexperia makes simple semiconductors such as switches and logic chips The auto industry one of Nexperia s biggest markets uses its chips for numerous functions such as adaptive LED headlight controllers electric conveyance battery management systems and anti-lock brakes Headquartered in the Dutch city of Nijmegen Nexperia was spun off from Philips Semiconductors two decades ago It was eventually purchased by China s Wingtech Apparatus in for billion Nexperia has wafer fabrication plants in Britain and Germany It operates an assembly and testing center in China s southern manufacturing heartland of Guangdong which accounts for around of its end-product threshold and similar centers in the Philippines and Malaysia Geopolitics The dispute is part of the broader struggle between the U S and China over tech supremacy which has left Europe caught in the middle It stems from Washington s decision late last year to place Wingtech on its entity list which subjects companies to export controls because of national safety risks In late September the U S expanded that list to Wingtech s subsidiaries including Nexperia pressuring allies to follow suit After the Dutch establishment asserted control of Nexperia Beijing responded soon after blocking the export of Nexperia chips from its assembly plant in the Chinese city of Dongguan It blamed the Netherlands for turmoil and chaos in the chip supply chain There were signs of hope following last month s high-profile meeting between U S President Donald Trump and Chinese leader Xi Jinping when the White House announced Beijing would ease the export ban as part of a U S -China commerce truce Despite Beijing also confirming exports would be allowed to resume Nexperia s Chinese unit explained headquarters suspended shipments of wafers used to make chips to its Chinese factory potentially crimping its ability to deliver finished products Nexperia s head office hit back in a message Wednesday saying the Chinese unit refused to pay for the wafers and accused it of ignoring the lawful instructions from its global management gang The company explained it can t guarantee the quality of any chips delivered from its China plant since Oct Auto disruption Modern automobiles rely on so-called discrete chips made by companies like Nexperia which unlike more advanced microprocessors perform a single function Leaders at big carmakers spelled out their worries in the latest round of earnings calls saying that finding a replacement for Nexperia at scale in the short term will be arduous While Nexperia makes up only about of the automotive silicon discrete industry in term of revenue its share is much higher in terms of discrete chip volume S P Global Mobility analysts wrote in a latest note Nexperia s parts are widely used across wagon systems often dozens to hundreds per conveyance and carmakers in North America Japan and South Korea are at threat they added It s an industrywide issue A quick breakthrough is really necessary to avoid fourth quarter production losses for the entire industry Ford CEO Jim Farley reported General Motors CEO Mary Barra warned that production could be hit The company has teams working around the clock with our supply chain partners to minimize practicable disruptions she declared Nissan CEO Ivan Espinosa narrated CNBC that the company is setting aside a billion yen million provision for supply risks in part to absorb the impact from the Nexperia situation on production Mercedes-Benz is scurrying around the world to look for alternatives CEO Ola Kallenius noted The European Automobile Manufacturers Association reported members including BMW Renault Volkswagen and Volvo have been forced to use their reserve stockpiles of chips and warned of assembly line stoppages if they run out Resolution The European Union s exchange commissioner Maros Sefcovic on Saturday noted encouraging progress writing on X that China s Commerce Ministry had ratified further simplification of export procedures for Nexperia chips to the EU and global customers In Beijing the Commerce Ministry also declared Saturday that it agreed to a Dutch request to send representatives to China for consultations But it noted that the Netherlands had not taken any concrete actions yet to restore the global semiconductor supply chain since the Dutch leadership declared days earlier it would take appropriate policies on our part where necessary Economics Affairs Minister Vincent Karremans had disclosed in that declaration that the Netherlands trusts that the supply of chips from China to Europe and the rest of the world will reach Nexperia s customers over the coming days Honda has received word that Nexperia s shipments from China have resumed Executive Vice President Noriya Kaihara stated reporters Friday He noted the Japanese automaker expects to resume production during the week of Nov at its plant in Celaya Mexico which can make up to vehicles a year AP Business Writer Yuri Kageyama in Tokyo contributed to this analysis Source