Nexperia Crisis: Ministry of Economic Affairs Sees "Considerable Impact"

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The crisis surrounding Nexperia, a chip manufacturer that emerged from the Philips universe, appears to be affecting the German economy somewhat more severely and in the short term than previously known. After representatives from the economic sector met with a state secretary from the Federal Ministry for Economic Affairs on Wednesday for a crisis meeting, the ministry, responsible for supply chain security, stated in response to an inquiry from heise online that initial feedback indicated "that German companies are considerably affected by the Chinese export ban." While research and development are at least partly still located in Europe, significant parts of Nexperia's production are based in the People's Republic – close to the processing companies.

Dutch Prime Minister: Not Directed Against China

However, the Federal Ministry for Economic Affairs did not specify which sectors in Germany are precisely affected. A strong dependence in the automotive sector is publicly known, but companies in aviation and mechanical engineering also appear to be affected. According to its own statements, the company produces more than 100 billion components such as MOSFETs or SiCs annually.

The state and party leadership of the People's Republic had imposed an export ban on Nexperia products and devices manufactured with them a few days ago, after the outgoing right-wing nationalist Dutch government under Dick Schoof placed the company, based in Nijmegen, under receivership. The background was the fear of a core dismantling and complete relocation to China. The NXP spin-off was bought in 2021 by the partially state-owned Chinese Wingtech Technology. Prime Minister Dick Schoof reiterated on Wednesday morning, according to Dutch media reports, that the measures are "not directed against China" but against the CEO forcibly removed by the government in The Hague.

Mechanical Engineers and Medical Device Manufacturers See No Shortage Yet

While the public has repeatedly emphasized a departure from just-in-time supply chains after the Corona and Suez Canal chip crises, the costs for warehousing and diversification of upstream suppliers still seem to be assessed as higher than the benefits by some companies. The Association of German Mechanical and Plant Engineering (VDMA) is not yet aware of any specific impact, but expects effects later rather than sooner due to the comparatively low demand in terms of unit numbers – as primarily upstream producers would procure chips here.

According to the German Medical Technology Association, its members are not affected so far. However, based on past experiences and the continuously increasing demand, the industry sees a need for more European production of various semiconductor types, a spokesperson said in response to an inquiry. Availability is "important for practically all disease and treatment areas in the healthcare system."

The dispute over Nexperia is taking place against the backdrop of parliamentary elections in the Netherlands on Sunday, a trade conflict that is escalating again between the USA and the People's Republic, and an EU that is still seeking its course. Furthermore, the People's Republic had introduced a new sanctions regime not long ago that resembles the US system and can have immediate effects even outside its own territory. According to media reports, the Chinese Nexperia sites have also begun to re-deliver products to Chinese customers, with the destination being China.

VW Hopes for Alternative Supplier

The most prominent case of an affected company, meanwhile, provided a cautious partial relief this morning: VW has found alternative suppliers, reports Handelsblatt, citing the responsible board member, which means that a chip shortage-related production stop can likely be averted. However, a contract has not yet been concluded.

(mki)