On Tuesday, October 21, the Minister of Economic Affairs and Climate Policy of the Netherlands held a call with the Minister of Commerce of the People’s Republic of China, but they failed to find a resolution to the deadlock surrounding the Dutch chip manufacturer, Nexperia.
The Dutch government expressed concerns that Nexperia’s chip technology might be misappropriated back to mainland China by its parent company, Wingtech Technology, which is listed in Shanghai. At the end of September, the Dutch government announced the temporary takeover of Nexperia for one year, prohibiting Nexperia and its subsidiaries from making any adjustments to assets, intellectual property, business, and personnel within the year. The Dutch government alleged that the actions of Wingtech CEO and Nexperia CEO, Zhang Xuezheng, violated the agreement, posing threats to the economy and national security of the European Union.
In retaliation, the Ministry of Commerce of China placed comprehensive restrictions on the export of finished chips by Nexperia, causing concerns among European automakers that heavily rely on these products.
Nexperia produces semiconductor wafers in Germany and the UK, with 80% of their final products being processed in China before export.
The Dutch Minister of Economic Affairs, Vincent Karremans, mentioned in a brief statement that discussions were held to take further actions to reach a solution beneficial to Nexperia, Europe, and China.
“We will continue to stay in contact with the Chinese side in the coming period to collaborate and find a constructive resolution,” the statement added.
However, the statement from the Chinese Minister of Commerce, Wang Wentao, maintained the consistent “wolf warrior” style of the Chinese government, attempting to shift all blame onto the Netherlands.
Wang Wentao stated in a declaration that discussions were held as scheduled with the Dutch minister and criticized the Dutch actions against Nexperia for “seriously affecting the stability of the global supply chain.” Furthermore, he urged the Netherlands to “uphold the spirit of the contract” and protect the rights of Chinese enterprises.
Recently, Nexperia’s Chinese subsidiary, Nexperia China, announced its separation from the headquarters, operating independently, and instructed all employees to reject “external orders.” Chinese employees revealed that the situation within the Chinese company is currently in chaos.
This action is seen as Chinese entities resisting against the headquarters of the company and the actions taken by the Dutch government under pressure.
Nexperia’s headquarters strongly opposed the internal memorandum released by Nexperia China, claiming that the mention of “abandoning the Chinese market” and the Chinese factories operating independently under “new entities” in the memorandum are false.
The basic chips produced by Nexperia are widely used in automotive electronic systems, controlling various equipment from lighting, airbag systems to door locks, and windows.
Although not considered advanced chips, the high production volume of Nexperia makes it difficult for both the company’s headquarters and Nexperia China to find alternative partners in the short term.
Nexperia was sold to a Chinese consortium in 2017, and later acquired by the Chinese enterprise, Wingtech Technology Group, in 2019.
It is currently unclear how long the inventory of Nexperia’s customers can be sustained. China’s restrictions on Nexperia chip exports have already started impacting the entire automotive supply chain, prompting some European automakers to revisit their “COVID-19 response strategies” in the face of an imminent shortage of automotive chips.
The German Association of the Automotive Industry (VDA) hopes to focus discussions on “finding rapid and practical solutions.”
Hildegard Mueller, the President of the German Association of the Automotive Industry, stated in a declaration, “If the issue of disrupted Nexperia chip supply cannot be resolved in the short term, this situation may lead to extensive production constraints in the near future, potentially even causing production halts.”