Photographer: Lina Selg\/Bloomberg <\/p>\n
(Bloomberg) — An effort by Europe to\u00a0stand up to China and retain local technology is approaching a breaking point.<\/p>\n
In a fight over a critical link in the global supply chain, chipmaker\u00a0Nexperia BV\u00a0was wrested away from its Chinese owner by a Dutch court and now\u00a0one of the leaders\u00a0in so-called legacy chips is\u00a0racing to defend its independence. If the Nijmegen-based company is successful, Europe would hold on to valuable semiconductor manufacturing expertise and hand the region a rare victory over China.<\/p>\n
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By pushing back over Nexperia, Europe aims\u00a0to\u00a0\u201cset a precedent for what \u2018de-risking\u2019\u00a0means,\u201d\u00a0said Benedetta Girardi, program coordinator at the Hague Centre for Strategic Studies, referring to Europe\u2019s objective\u00a0of reducing dependencies\u00a0on China. The intention is to show that\u00a0Europe \u201cwants sovereignty and autonomy as part of the conversation\u201d over tech, even as it seeks to maintain\u00a0trade relations with a key partner.<\/p>\n
Since a Dutch court intervened\u00a0in Nexperia\u2019s ownership in October, the standoff has threatened to disrupt auto production in Europe and around the world. On one side, there\u2019s the core of the company, which is in the hands of court-appointed trustees in the Netherlands; the other side is a key production site that\u2019s\u00a0aligned with dispossessed owner\u00a0Wingtech Technology Co.\u00a0\u2014\u00a0an electronics firm that\u2019s\u00a030%-owned by entities close to the Chinese state.<\/p>\n
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As Nexperia seeks to expand non-Chinese\u00a0production capacity, Wingtech has stepped up efforts to regain control over the chipmaker it\u2019s owned since 2019. It has initiated talks with the\u00a0court-appointed trustees\u00a0to try to settle the dispute, while also appealing to the Dutch supreme court over the suspension of its ownership rights.<\/p>\n
A court hearing on Wednesday\u00a0will determine whether there\u2019s a quick resolution or a drawn-out legal tussle. The Amsterdam court\u00a0could order an investigation into the chipmaker if it sees reasons to doubt how Nexperia was managed. On the flipside, the measures taken against Wingtech\u2019s ownership of Nexperia and its founder could be dropped if the court opts against a probe.<\/p>\n
The hearing is expected to have wide-ranging implications not just for Nexperia\u2019s future, but the sustainability of the automotive supply chain and geopolitical ties.<\/p>\n
Behind the scenes, meanwhile, the two Nexperias are preparing for a potential future without the other.\u00a0For Nexperia China, that means finding alternative sources of wafers \u2014\u00a0the thin, flat slices of semiconductor material that\u2019s usually made of silicon. For the Dutch parent, it means expanding other production sites to have enough capacity to meet customer demand. Both efforts are complex.<\/p>\n
\u201cFacing the predicament arising from the improper interference by the Dutch government, Nexperia China has actively carried out \u2018production self-rescue\u2019,\u201d including procuring wafers elsewhere, Wingtech Chairwoman Ruby Yang told Bloomberg in an interview.<\/p>\n
\u201cOur wafer procurement cooperation in the Chinese market is a natural extension of this strategy,\u201d she said, adding that the initiative is aimed at improving operations \u201crather than serving as a wholesale replacement\u00a0for the existing supply chain.\u201d<\/p>\n
According to Yang, the Dutch side\u00a0is investing about $300 million to expand other facilities\u00a0with the goal of having 90% of its production capacity outside China by mid-2026. The projects demonstrate\u00a0\u201ca clear intent to de-couple from China,\u201d she said.<\/p>\n
The expansion plans at\u00a0Nexperia\u2019s sites in Malaysia and the Philippines aim to add tens of billions of units to annual capacity,\u00a0according to people close to the situation.\u00a0The company confirmed efforts to \u201caccelerate existing capacity-expansion plan\u200bs\u201d but declined to comment on specific figures or targets.<\/p>\n
With some Nexperia rivals\u00a0such as US-based OnSemi\u00a0signaling that they could\u00a0scale up\u00a0to take over Nexperia\u2019s orders, there\u2019s\u00a0pressure to act fast and there\u2019s little margin for error.<\/p>\n
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The messy dispute has\u00a0prompted banks to withdraw hundred of millions of dollars of financing to Nexperia, including an untapped $800 million revolving credit line, said the people, who asked not to be identified since the discussions are private.\u00a0The chipmaker said it is \u201cdebt-free and has a strong liquidity position,\u00a0which is unaffected by events in recent months,\u201d a spokesperson said in response to Bloomberg questions.<\/p>\n
The acrimony publicly emerged\u00a0in October when a court in Amsterdam ordered Wingtech\u2019s ownership rights placed in a trust over allegations the firm was improperly transferring technology from Europe to China. It also suspended Wingtech founder Zhang Xuezheng\u00a0as Nexperia\u2019s chief executive officer on claims he was diverting resources to affiliated companies and hobbling the Dutch chipmaker. Wingtech has denied wrongdoing.<\/p>\n
The court decision prompted Nexperia\u2019s site in Guangdong \u2014\u00a0which has capacity for\u00a0over\u00a050 billion units a year, or about half of the group\u2019s pre-crisis production \u2014 to stop cooperating with its parent in the Netherlands, which in turn halted wafer deliveries to China.<\/p>\n
Alongside the internal corporate feud, the Dutch and Chinese governments stepped in. The Netherlands imposed oversight powers on national security grounds and Beijing restricted Nexperia\u2019s exports from China. The political spat eased\u00a0after deliveries were allowed to resume, but China continues to press\u00a0for the Dutch to back down.<\/p>\n
\u201cThere is clearly an intention to turn Wingtech into kind of a future champion,\u201d said Mathieu Duch\u00e2tel, director of international studies at think tank\u00a0Institut Montaigne. \u201cFor the Europeans, what it showed is the key importance of having safe access to assembly capacity, which is clearly a weak point.\u201d<\/p>\n
While Nexperia is a bit player in the global semiconductor industry, its importance is in its ability to produce chips that perform simple functions like\u00a0controlling power supply at high volumes \u2014 about 3,000 components every second. While they\u2019re low-tech, the components are used in almost every electronic device.<\/p>\n
Nexperia\u2019s operations are set up for an era of seamless global commerce. Wafers from\u00a0facilities in Germany and the UK are shipped for testing and assembly to sites in China, Malaysia and the Philippines. From there, finished components are\u00a0delivered to customers around the world, including back to Europe.<\/p>\n
Photographer: Hollie Adams\/Bloomberg <\/p>\n
Concerns about supplies has spurred some big customers \u2014 such as auto-parts supplier\u00a0Robert Bosch GmbH\u00a0\u2014 to shuttle wafers from Nexperia facilities in Europe to China, according to people familiar with the matter. The process is costly and complex\u00a0and consequently not seen as a long-term solution, the people said.<\/p>\n
As part of its expansion plans, the Dutch parent has held talks with customers on investing in Nexperia\u2019s\u00a0sites\u00a0in southeast Asia, the people said.<\/p>\n
A Bosch spokesman declined to comment on supplier relationships for competitive reasons, but said the company remains in close contact with Nexperia and is working to minimize any production constraints.<\/p>\n
Shortages of Nexperia chips have caught automakers by surprise. Honda Motor Co. halted production at several plants, while Volkswagen AG and others scrambled teams to secure alternatives. Top parts supplier\u00a0ZF Friedrichshafen AG reduced output.<\/p>\n
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To avoid a similar choke point in the future, European nations are discussing how to subsidize backend production outside of China, a person familiar with the matter said.\u00a0At the same time, China also faces pressure from the country\u2019s carmakers, including BYD, to ensure stable supply,\u00a0 according to people briefed on the matter.<\/p>\n
Even if one or both Nexperias survive or\u00a0find a way to reconcile, the brand\u2019s reputation has been\u00a0damaged\u00a0and that could be hard to repair and creates longer term uncertainties.<\/p>\n
\u201cAs countries jockey for control over different stages of the semiconductor value chain, it\u2019s going to lay out these potential breaking points,\u201d said Jacob Feldgoise,\u00a0senior data research analyst at\u00a0Georgetown University\u2019s Center for Security and Emerging Technology. \u201cThe risk associated with this situation was really not on anyone\u2019s radar.\u201d<\/p>\n
–With assistance from William Wilkes, Charlotte Hughes-Morgan, Chunying Zhang and Patrick Van Oosterom.<\/p>\n
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\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"Photographer: Lina Selg\/Bloomberg (Bloomberg) — An effort by Europe to\u00a0stand up to China and retain local technology is…\n","protected":false},"author":2,"featured_media":402750,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[7904,4,450,144,1076,21578,451,3,131052,452,453],"class_list":["post-402749","post","type-post","status-publish","format-standard","has-post-thumbnail","category-breaking-news","tag-bloomberg","tag-breaking-news","tag-breakingnews","tag-china","tag-europe","tag-global-supply-chain","tag-headlines","tag-news","tag-nexperia","tag-top-stories","tag-topstories"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/402749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=402749"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/402749\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/402750"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=402749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=402749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=402749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}