Nexperia has halted shipments of wafers to its main facility in Dongguan, China, causing a supply shock that is currently hitting European automakers. The company notified customers that it was unable to continue delivering locally due to a dispute with local management.
The Dongguan factory is one of the world’s largest assembly and testing facilities, and before the conflict handled about half of Nexperia’s total production. Cutting it off would mean the supply chains serving automakers would be squeezed at the worst possible time.
A Nexperia spokesperson reportedly told Bloomberg:
“While we have maintained shipments as long as commercially possible, continuing the current flow of supplies to the Dongguan site is no longer justified.”
Nexperia claims the decision is related to contractual issues with local site managers, but the situation is more than an internal disagreement.
The Dutch interim government vetoed Nexperia in late September, citing concerns that the company’s Chinese owner, Wingtech Technology, was interfering with its operations in a way that threatened its financial stability.
Internal power struggles cause supply chain pressures
The Dutch Economy Ministry said the actions taken by Wingtech founder Zhang Xuezheng pose a direct threat to Nexperia’s viability, including its manufacturing capabilities and the security of its intellectual property.
An Amsterdam court suspended Zhang as CEO on October 7 following allegations from Nexperia’s own management, but Wingtech rejected the charges and demanded Zhang’s reinstatement.
The company insisted it was not involved in any form of technology theft and claimed the dispute was being exploited.
“It is hard to escape the conclusion that we have identified Mr. Zhang as a soft target whose removal could be touted as a victory,” Wingtech said, adding that it needed to regain full control to stabilize operations.
“The CEO’s actions posed a serious threat to the continuity of production capacity, knowledge and intellectual property,” the Dutch ministry said in a statement, also citing the misuse of funds related to Zhang’s other businesses in China.
The ministry also clarified that it did not directly suspend Zhang. His dismissal was brought about by an independent investigation by the Companies Chamber of the Amsterdam Court of Appeal.
Automakers and suppliers are feeling the squeeze
Supply disruptions have already affected Volkswagen, BMW, Mercedes-Benz, Stellantis and Ford, many of which rely on major auto supplier ZF Friedrichshafen AG for NeExperia parts.
According to Bloomberg, people familiar with ZF’s management said the company has cut shifts at its electric drivetrain plant in Schweinfurt, Germany, due to a shortage of parts related to production of the NeXperia. ZF has not officially commented on the situation.
Complicating matters, the Chinese government has blocked exports of chips produced at the Dongguan facility over a Dutch veto. So even when the wafers arrived at the factory, the chips could not leave China.
As a result, European automakers are short of inexpensive transistors and logic chips that are small but essential for everything from engine control systems to power steering units.
Nexperia produces these components in large quantities with manufacturing facilities in Germany and the United Kingdom, and additional test and assembly facilities in the Philippines and Malaysia, but none match the production scale of the Dongguan facility.
Neexria said it had notified customers due to “local management’s non-compliance with agreed contractual arrangements”. “Shipments will resume once all contractual obligations are once again fully met,” the company added.
Auto industry executives say the only viable short-term solution is to strike a temporary agreement to allow exports while broader negotiations continue. The longer the time, the greater the risk that the assembly line will slow down or stop.
No one compromises here. And the supply chain is paying the price.
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