The crisis at semiconductor maker Nexperia sent automakers into a panic. Here’s what you need to know

A little-known battle for supremacy among chipmakers threatens global auto production by disrupting chip supply chains, but there are signs the crisis is nearing a resolution.

The power struggle over Chinese-backed Dutch chipmaker Nexperia has highlighted how weaknesses in the technology supply chain are straining automakers, with Honda in particular forced to suspend production at a plant in Mexico that makes the popular HR-V crossover for the North American market. It also reveals how Europe is caught in the middle of a broader geopolitical showdown between Washington and China.

Here’s what the controversy looks like:

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Unrest erupted into public view in mid-October, with the Dutch government announcing weeks earlier that it had invoked a rarely used World War II-era law to take effective control of Nexperia.

The Dutch Economy Ministry said it took the action due to national security concerns. Officials said they intervened because of NExperia’s “serious governance deficiencies” and argued for controls to prevent the loss of critical technological know-how that could threaten Europe’s economic security.

Nexperia’s Chinese owner Wingtech Technology, a partly state-owned company, is at the center of the dispute. Amid a boardroom dispute, a Dutch court granted the ministry’s request to remove Nexperia’s Chinese CEO, Zhang Xuezheng. U.S. officials told the Dutch government that he needed to be removed to avoid trade restrictions, according to court filings.

What is Nexperia?

Nexperia makes simple semiconductors such as switches and logic chips. The automotive industry, one of Nexperia’s largest markets, uses the company’s chips in a number of functions, including adaptive LED headlight controllers, electric vehicle battery management systems, and anti-lock brakes.

Headquartered in the Dutch city of Nijmegen, Nexperia was separated from Philips Semiconductors 20 years ago. It was eventually acquired by China’s Wingtech Technology in 2018 for $3.6 billion.

Nexperia has wafer fabrication facilities in the UK and Germany. The company operates an assembly and testing center in Guangdong province, a manufacturing hub in southern China that accounts for about 70% of its final product production capacity, and similar centers in the Philippines and Malaysia.

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The dispute is part of a broader battle between the United States and China for technological supremacy, with Europe caught in the middle.

This stems from the US government’s decision late last year to place WingTech on the Entity List, which subjects companies to export restrictions due to national security risks. In late September, the United States expanded its list to include Wingtech’s subsidiaries, including NExperia, and pressured its allies to follow suit.

After the Dutch government asserted control over Nexperia, the Chinese government quickly responded by blocking exports of Nexperia chips from an assembly plant in the Chinese city of Dongguan. It accused the Netherlands of “chaos and disruption” in the chip supply chain.

There were signs of hope after a high-profile meeting between US President Donald Trump and Chinese leader Xi Jinping last month, when the White House announced that Beijing would ease export embargoes as part of a US-China trade truce.

Despite the Chinese government also confirming permission to resume exports, Nexperia’s Chinese arm said its headquarters had stopped shipping wafers used in chip manufacturing to factories in China, potentially reducing its ability to supply finished products.

Neexria’s headquarters hit back in a statement Wednesday, accusing its Chinese unit of refusing to pay for the wafers and “ignoring lawful instructions” from global management. The company said it cannot guarantee the quality of chips shipped from its Chinese factory after October 13.

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Modern cars rely on so-called discrete chips made by companies like Nexperia. These chips perform a single function, unlike more advanced microprocessors. Executives at major automakers expressed concerns in their latest earnings calls, saying it would be difficult to find a successor to Nexperia on a large scale in the short term.

“While Nexperia accounts for only about 5% of the automotive silicon discrete market in terms of sales, it far exceeds that share in terms of discrete chip volume,” S&P Global Mobility analysts wrote in a recent note.

Nexperia parts are widely used throughout vehicle systems, often dozens to hundreds per vehicle, putting automakers in North America, Japan and South Korea at risk, they added.

“This is an industry-wide problem, and we really need an immediate solution to avoid industry-wide production losses in the fourth quarter,” said Ford CEO Jim Farley.

General Motors CEO Mary Barra warned that production could be affected. She said the company has “a team working with our supply chain partners around the clock to minimize the potential for disruption.”

Nissan CEO Ivan Espinosa told CNBC that the company has set aside 25 billion yen ($163 million) in reserves for supply risks to “absorb” the impact on production from the Nexperia crisis.

Mercedes-Benz is “traveling around the world to find replacements,” CEO Ola Kallenius said. The European Automobile Manufacturers Association said member countries including BMW, Renault, Volkswagen and Volvo had been forced to use reserve stockpiles of chips, warning that assembly lines would be shut down if they ran out.

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European Union Trade Commissioner Maros Sefcović noted “encouraging developments” on Saturday, writing in X that China’s Ministry of Commerce had confirmed “further simplification” of export procedures for Nexperia chips to customers in the EU and around the world.

In Beijing, the Commerce Ministry also announced on Saturday that it had agreed to a Dutch request to send a representative to China for “consultations.”

However, he pointed out that the Netherlands has not yet taken concrete action to restore the global semiconductor supply chain since the Dutch government said a few days ago that “we will take appropriate measures on our side if necessary.”

“The Netherlands believes that the supply of chips from China to Europe and the rest of the world will reach Nexperia customers within a few days,” Economy Minister Vincent Kallemans said in the statement.

Honda has received word that shipments of Nexperia from China have resumed, Vice President Noriya Kaihara told reporters on Friday. He said the Japanese automaker plans to resume production the week of Nov. 21 at its Celaya plant in Mexico, which can produce up to 200,000 cars a year.

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