DONGGUAN, China – A factory next to a weed-ridden lot in China’s industrial south has become a global choke point for automotive chips, upending a sector that just a few years ago swore it wouldn’t be caught again by supply-chain disruptions.
Automakers vowed to strengthen supply lines after COVID-19 snarled semiconductor output in 2020 and a Japanese factory fire aggravated the shortage a year later. But the crisis engulfing Dutch chipmaker Nexperia’s plant exposed a blind spot: The industry never envisioned low-tech chips would become a lever for China against the West, Reuters reported.
“No one prepared for geopolitical disruption, and they’re still not prepared,” said Ambrose Conroy, CEO of U.S. firm Seraph Consulting, which advises automakers.
The Dutch government took control of Netherlands-based Nexperia in late September, citing concerns its technology could be passed on to Chinese owner Wingtech (600745.SS), opens new tab. Beijing retaliated by halting exports of finished Nexperia chips packaged at the plant in the Pearl River Delta.
The Netherlands last week reversed course from its decision to take control of Nexperia, signalling a potential breakthrough.
From its Dongguan factory, Nexperia ships semiconductors used in everything from car brakes to electric windows. They sell for fractions of a penny each, yet the shortage forced Nissan and Honda to cut production and drove German supplier Bosch to curtail factory working hours.
This account of how the industry scrambled to respond to the unforeseen crisis is based on interviews with a dozen people, including auto executives, suppliers and chip distributors, who described how just-in-time inventory practices and limited supply-chain diversification left automakers vulnerable to geopolitical shock.
The reporting shows how China’s dominance reaches beyond cutting-edge technology and rare earths to mundane-yet-critical components and how Beijing wields that power to paralyse global production. Some details, including the size of Bosch’s exposure and companies’ struggles with requirements to trade in yuan, haven’t previously been reported.
While the Dutch government took control of the headquarters in Nijmegen, the operations in China remained under the control of Nexperia’s Chinese parent.
“The Dutch thought they had seized Nexperia, but they only took over an office building,” said Li Xing, a professor of international relations at the Guangdong Institute for International Strategies, a think tank.
“What this shows is that, even in mid- and low-end segments, they depend on China. If China wants to get a grip on you, it still can. You have no way out.”
In a statement, a spokesperson for Wingtech said Nexperia has become an industry leader since being acquired. “The current crisis shows that breaking up international companies harms supply chains and puts key industries at risk,” the spokesperson said.
China’s commerce ministry didn’t respond to requests for comment.
A Nexperia spokesperson said the semiconductor industry’s global complexity made it hard to foresee the impact of geopolitics.
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