Nexperia, a semiconductor company based in the Netherlands, has shut down part of its factory in China due to chip shortages, leading to an expected exacerbation of global supply chain chaos. Employees have described this shutdown as highly unusual.
Reports from the Hong Kong-based South China Morning Post on Monday, October 27th, indicated that Nexperia’s subsidiary, Nexperia China, located in Dongguan, has significantly reduced its production scale in recent days. The factory not only cut back on working hours but also halted operations on one-third of its machines in certain production areas. Furthermore, recruitment posters outside the factory have been removed. The Dongguan plant is responsible for about 70% of Nexperia’s products.
Three factory employees mentioned that the company has reduced monthly working hours, and one employee revealed that regular shift hours have also been cut.
Another worker stated that due to a shortage of wafer supplies from Nexperia’s facilities in Germany and the United Kingdom, about one-third of the machines in his production workshop have been idle for about a week. The Dongguan plant mainly handles the packaging of wafers produced in Europe.
“These machines are rarely shut down. They have been running continuously, even during holidays,” said the worker, emphasizing the unusual nature of this shutdown.
Concerned about the risk of Nexperia’s chip technology being stolen back to mainland China by its parent company, VeriSilicon, which is listed in Shanghai, the Dutch government announced the temporary takeover of Nexperia for a year at the end of September. The government imposed a ban on Nexperia and its subsidiaries from making any adjustments to assets, intellectual property, business, and personnel for a year. The Dutch government accused VeriSilicon CEO and Nexperia’s acting CEO, Charles Zhang, of violating the agreement and posing a threat to the economic and national security of the European Union.
In retaliation, the Chinese Ministry of Commerce has imposed comprehensive restrictions on the export of finished Nexperia chips. Nexperia China has publicly rejected orders and personnel instructions from its Dutch headquarters and declared independent operation.
The standoff between the Dutch headquarters and the Chinese factory has heightened concerns about disruptions in the automotive industry supply chain. The automotive industry is one of Nexperia’s key customer bases, ranging from Europe to Japan.
Last week, Nexperia headquarters notified its Japanese automotive customers that it may no longer be able to guarantee timely deliveries. Faced with the ongoing tightening of restrictions on key manufacturing components by Chinese authorities, the European automotive industry has been working tirelessly to find remedial measures.
A spokesperson for Nexperia’s Dutch headquarters told the South China Morning Post that the company is still supplying its Dongguan plant and hopes to “resolve the situation as soon as possible.” The spokesperson added that the company is “supporting its employees and customers in China.”
Security personnel at the Nexperia Dongguan plant declined an interview request from the South China Morning Post, and VeriSilicon did not respond to inquiries on Monday. Reports indicating that automakers are facing chip shortages and Beijing’s recent upgrading of export restrictions on rare earths have drawn significant attention to cross-border investment and security issues related to Nexperia.
Officials from both China and the Netherlands have become involved in this matter.
Last week, Chinese Minister of Commerce Wang Wentao held a telephone conversation with Dutch Minister of Economic Affairs Vincent Karremans. Following the meeting, both sides issued separate statements and failed to find a resolution to the Nexperia deadlock.
European Commissioner for Trade Maros Sefcovic stated that Wang Wentao accepted an “urgent” invitation to visit Brussels and is expected to make the trip in the coming days.
Dutch Prime Minister Dick Schoof emphasized that the Netherlands’ takeover of Nexperia was not a “measure against China” but a response to the poor management by Nexperia’s CEO, Charles Zhang. Zhang has remained silent on the matter in recent weeks.