The escalating trade war between the United States and China has placed Nexperia, a critical Dutch semiconductor manufacturer, at the center of a dispute that threatens to force global auto plants to halt production and drive car prices even higher, according to industry experts. This conflict underscores the fragility of supply chains in an increasingly interconnected global economy.
Nexperia, though little-known to consumers, produces essential chips used in nearly every modern vehicle, from engine management and braking systems to adjustable seats and fuel injection. The company ships over 110 billion components annually, with more than 6,000 products qualified for automotive use, and employs 12,500 people across Europe, Asia, and the United States. Its dominance in certain segments, such as transistors and diodes, means that any disruption could have cascading effects on auto manufacturing worldwide.
The dispute began in December when the US Commerce Department restricted Nexperia’s parent company, China-based Wingtech Technologies, citing national security and trade concerns. In October, China retaliated by banning Nexperia’s Chinese operations from exporting specific finished components and sub-assemblies. This move prompted the Dutch government to seize control of Nexperia in an effort to stabilize the situation and prevent broader economic fallout, highlighting Europe’s precarious position in US-China tensions.
Automakers and their trade associations have raised alarms, warning that production could be disrupted within weeks if the issue is not resolved. John Bozzella, CEO of the Alliance for Automotive Innovation, stated that without a quick resolution, auto production in the US and many other countries could face severe impacts, with potential spillover effects into other industries. He emphasized the urgency, saying, ‘It’s that significant. We’re urging a quick resolution, so U.S. and global automaking remains on track.’
The European Automobile Manufacturers Association noted that replacing Nexperia’s chips would take months, while existing supplies might last only weeks. Sigrid de Vries, the association’s director general, called for ‘quick and pragmatic solutions’ from all involved countries, adding that automakers have diversified supply chains but cannot eliminate all risks. This vulnerability echoes the chip shortage during the COVID-19 pandemic, which led to temporary plant shutdowns and a significant drop in new vehicle supplies.
Nexperia holds about 40% of the market for certain automotive chips, according to Ian Riches of TechInsights, making it difficult to quickly source alternatives. Vehicles cannot be completed without these critical components, which control everything from basic functions to advanced safety features. The current situation has automakers scrambling to implement business continuity plans, though Nexperia has expressed confidence that a solution will be found.
Broader implications include rising car prices, with the average new vehicle in the US recently surpassing $50,000 for the first time, partly due to existing tariffs and supply chain strains. If the dispute persists, consumers could face even higher costs, and the auto industry might experience job losses and reduced output. The defence sector is also exposed, as noted in related reports, emphasizing how trade conflicts can ripple across multiple industries.
Moving forward, industry leaders are urging diplomats and policymakers to resolve the dispute promptly to avoid widespread economic damage. The outcome could shape future trade policies and highlight the need for greater resilience in global supply chains. Without intervention, the auto sector risks significant disruptions, underscoring the importance of international cooperation in an era of geopolitical rivalry.