Yet the Dutch-owned semiconductor company Nexperia now finds itself at the center of a geopolitical firestorm. In late February, as the crisis unfolded, the Dutch government temporarily invoked a Cold War-era emergency law to nationalize the company. This superlative step tackles increasing worries over leadership and operational missteps. These problems are particularly rooted in Nexperia’s problematic Chinese ownership, which is tied to its ultimate parent company, Wingtech Technology. This dramatic shift has reverberated throughout the automotive world with a deep and strong current. It should raise urgent questions around the supply chain vulnerabilities that manufacturers are grappling with.
Nexperia, established in 2017 as an independent company, is committed to manufacturing the critical “legacy” or “building block” semiconductors. These components are crucial to many aspects of automotive technology from power steering to airbags. About 70% to 80% of the company’s production goes to China to be assembled, tested, and packaged. This heavy reliance on Chinese operations has now become a point of contention, exposing car makers to potential disruptions stemming from Beijing’s control over semiconductor supply chains.
In late September, the Dutch government cited “serious governance shortcomings and actions within Nexperia” as justifications for its intervention, declaring that these issues posed a significant threat to national interests. As part of this decision, the government moved to suspend Nexperia’s previous chief executive, Zhang Xuezhen. He is the founder of Wingtech Technology. Rodriguez contested the suspension, and a Dutch court ruled that mismanagement was not grounds for his suspension.
This surprising twist in events has sparked fury from China, which has accused the Netherlands of political meddling. The Chinese commerce ministry stated, “China welcomes the EU to continue exerting its influence to urge the Netherlands to correct its erroneous practices as soon as possible.” Through the lens of diplomatic tensions, we see the tenuous balance of power at play in the international supply chain. More importantly, they illustrate the challenge in making semiconductors.
Adding another layer to this situation is the United States’ entity list, which could potentially restrict Nexperia’s operations due to its Chinese ownership. Dutch authorities have suggested that a change of leadership at Nexperia could make an exemption from this list more likely. “It is almost certain that the CEO will have to be replaced to qualify for the exemption from the entity list,” they noted.
Tom Nunlist, Associate Director at Trivium China, has been emphasizing the points that create these unique opportunities in the current climate. He acknowledges that China and the EU may work together like never before. He remarked, “The narrative was that, since Trump came in and caused chaos for everybody, maybe there’s an opportunity for China and the EU to work more closely together.” However, this may not be straightforward, as he added that “Western countries don’t want Chinese investors in these types of strategic manufacturing assets, even legacy chips.”
Nexperia’s challenges highlight broader industry concerns. Bill Bishop, an expert on supply chain management, commented on the situation: “Car makers blindsided by the Nexperia mess should be hiring new supply chain management executives, as they clearly learned nothing from Covid… and excessive reliance on supply chains.” Given that, his statement is illustrative of an increasing understanding by manufacturers that their dependencies can create operational risks with tremendous downside.
The stresses involved with changing supply chains are unsurprisingly felt by industry experts. Nunlist elaborated, “Companies can’t move on a dime; there are incentives to keep supply chains in place and it’s extremely complicated and costly to change things.” This realization deepens debates around the ways that corporations can respond to growing geopolitical hostilities yet maintain their businesses in these key areas.
In light of these developments, EU Trade Commissioner Maros Sefcovic has stated that discussions with China are ongoing to establish a “lasting, stable, predictable framework that ensures the full restoration of semiconductor flows.” This further underscores how critical semiconductors are to today’s economies—both economic and national security. It further highlights the immediate need for stable trade relations.
The Dutch government’s intervention in Nexperia. This controversial move underscores the deepening fight over dominance in key technologies. As countries grapple with global supply chain vulnerabilities exacerbated by geopolitical tensions, Nexperia’s situation exemplifies how corporate governance issues can have far-reaching implications beyond national borders.