How a Dutch Auto Chip Maker Got Caught Up in the U.S.-China Trade War

Nexperia is a Dutch producer of automotive microchips that was acquired in 2017 by state-controlled Chinese conglomerate Wingtech Technology. (Hollie Adams/Bloomberg)

Breaking up with China is hard to do—especially for Europe, caught in the U.S.-China trade war crossfire. Messing with small bits of a supply chain can cause big global headaches. Those are lessons from the unfolding drama around Nexperia, a Dutch producer of humble yet essential automotive microchips that was acquired in 2017 by state-controlled Chinese conglomerate Wingtech Technology.

Nexperia’s plant in Nijmegen cranked out billions of components necessary to draw power from your car battery or turn your headlights on. It shipped them to China, where Wingtech tested, packaged, and re-exported them. “Nexperia makes the types of chips that are fundamental to virtually every modern vehicle,” says Nick Paul, general manager for United Kingdom–based supply chain specialist IC Blue “Substitution in automotive is difficult.”

Trouble started in December. The Biden administration, in its final tech war fusillade, added Wingtech and 139 other Chinese chip-related companies to its “entities list,” meaning that any U.S. business would need a special license to deal with them.

President Donald Trump’s Commerce Department upped the ante in September, determining that entities restrictions extended to any subsidiaries, e.g., Nexperia. On Oct. 12, the Dutch government invoked its 1952 Availability of Goods Act to assume control over Nexperia management.

“The Americans forced one of the most entrepreneurial countries on Earth into an expropriation lite,” says Dimitar Lilkov, a senior research officer at the Wilfried Martens Centre for European Studies.

Beijing’s first response was to shut down the Nexperia trade. Auto makers’ reaction was fast and global. Honda Motor suspended production at a Mexican assembly line. Volkswagen said it could be a week away from its own shutdowns.

China started sending more mixed signals after leader Xi Jinping’s sit-down with Trump on Oct. 30. “We will comprehensively consider the actual situation of the enterprise and exempt eligible exports,” its Commerce Ministry announced. “[China] has been engaging with EU companies to restore the partial flow of chips,” a European Union spokesperson noted on Nov. 4. “This avoids a worst-case scenario.”

So, China may not be ready to break up with the West yet, either. This might not be the last test where Beijing leans on its strength in work-a-day industrial semiconductors while Silicon Valley is entranced by whiz-bang artificial-intelligence-driven breakthroughs, though. “This dispute highlights that mature-node components are in fact strategically critical, and China remains central to global production,” Paul says.

The good news for Europe is that it’s also host to a brace of mature-node chip powers whose stocks have languished while U.S. tech sprinted ahead. The Continent is particularly strong in automotive chips, which could grab more investor attention if the AI bubble ever pops. Germany’s Infineon Technologies is the global leader in that category, followed by Dutch-Swiss STMicroelectronics.

“These companies make the most innovative chips for electric vehicles,” says Javier Correonero, an analyst covering European semiconductors at Morningstar. “That’s just not as growthy as AI.” Rounding out his list of potential European tech sleepers are two Dutch semiconductor equipment manufacturers: ASM International and BE Semiconductor.

It isn’t only Washington nudging Europe out of China’s embrace. Fearful of more Nexperias in the emerging domains of EVs and green technology, EU President Ursula von der Leyen ushered in a “de-risking” strategy for relations with the No. 2 economy. It would help if the Atlantic allies could work together, Lilkov argues.

“The Americans are smashing through their own interests and leaving us with a bloody nose,” he says.