Is the automotive industry facing a new chip crisis?

Car manufacturers may be facing a new semiconductor crisis. Major chip supplier Nexperia has recently experienced supply problems after the Dutch government took control of the company, which was previously run by a Chinese parent company. Following the takeover, China stopped exporting Nexperia products such as chips for the automotive industry.

According to the German Association of the Automotive Industry, VDA, the company then informed car manufacturers and suppliers that it could no longer guarantee the full supply of its chips. Nexperia is a key supplier to the automotive industry, as the company’s semiconductors are often used in control units for vehicle electronic systems. Nexperia runs a manufacturing plant in in Hamburg, among other places, but is dependent on supplies from China, which are now no longer available.

Industry association warns of impending production shutdowns

“The situation could soon lead to significant production cutbacks, and possibly even to production shutdowns,” warned VDA President Hildegard Müller. The chip shortage could even push Germany into recession this year, according to calculations by the Association of Research-Based Pharmaceutical Companies (VFA). Depending on how long the automotive and supplier industries are unable to obtain semiconductors from Nexperia, gross domestic product (GDP) growth could drop by between 0.04 and nearly 0.5 percentage points, according to a VFA forecast quoted by the German newspaper Handelsblatt.

Nexperia is a subsidiary of the Chinese company Wingtech and has its European headquarters in Nijmegen. Dutch Minister of Economic Affairs Vincent Karremans recently had the Chinese owner of the company stripped of control by a ruling of the Amsterdam Economic Court. In doing so, he invoked a law that is very rarely applied. The aim is to prevent the outflow of technological knowledge and intellectual property to China. The minister stated that the trade dispute between the US and China had nothing to do with the conflict over Nexperia. However, court documents show that the US had urged The Hague to take this step.

Car manufacturers maintain production is secured for now

According to the companies, the impact on manufacturing plants has been limited so far. Last week, the Volkswagen Group warned of possible short-term production interruptions, but then gave the all-clear again on Friday. According to VW, there will be no shutdowns this week despite the chip shortage. As things stand today, vehicle production at the German sites is secured for the coming week, the company announced on Friday. This also applies to subsidiaries Audi and Porsche, as well as to the Škoda and Seat plants in Czechia and Spain, a VW spokesperson added.

However, it is not yet possible to predict how things will develop in November. “Given the dynamic situation, short-term effects on the Volkswagen Group’s production network cannot be ruled out,” he explained.

BMW made a similar statement. “Production at our plants is continuing as planned,” a spokesperson for the manufacturer said. “We are in close contact with our suppliers and are continuously assessing the situation in order to identify potential supply risks at an early stage and take appropriate measures.”

Major suppliers such as ZF have already set up task forces to deal with the situation. The company is working with customers and suppliers to keep supply chains stable and to evaluate alternative suppliers, it announced. In response to an enquiry, Bosch stated: “Like other Nexperia customers, we are also facing major challenges due to the current situation. We therefore hope for a quick resolution between the parties involved, which will help to ease the current bottleneck situation.”

German and Dutch governments are working to resolve the conflict

The Dutch government is currently seeking an agreement with China. According to his own statements, Minister of Economic Affairs Karremans spoke on the phone with his Chinese counterpart Wang Wentao last week. ‘We discussed further steps to find a solution that is in the interests of Nexperia, the European and Chinese economies,’ Karremans explained.

The German government is also working on a solution to the conflict. ‘The situation has not yet been resolved, but we are really working on it,’ said German Minister of Economy Katherina Reiche. Together with the European Commission, she said, they are in contact with the Chinese government. The German government has approached the Chinese Minister of Commerce to ensure the resumption of chip exports. During the visit of a Chinese negotiating team to Brussels scheduled for next Thursday, semiconductors and the Nexperia issues are likely to be on the agenda, alongside rare earths.

The German automotive industry is also working hard to combat the impending chip shortage. Both Volkswagen and Mercedes-Benz have announced that they are looking for alternative sources of supply. Meanwhile, the German government wants to reduce companies’ dependence on chips from abroad, according to the Ministry of Economic Affairs. A ministry spokeswoman did not provide any specific details, but said the government is in contact with the industry and referred to the microelectronics strategy recently approved by the cabinet, which focuses on supply chain resilience.

The high market penetration of Nexperia chips means that the shortage affects a large number of industries and companies. According to the Handelsblatt newspaper, Nexperia’s issues are currently forcing German mechanical engineering companies to reorganise their supply chains. Those most affected are mechanical engineering companies whose control and drive systems rely on Nexperia chips. Although other companies could also manufacture these standard chips, they would first have to go through the necessary certification procedures, Handelsblatt explained.

 

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