🔹Japanese 🇯🇵suppliers are now among the growing number of global auto companies warning of possibly “serious” semiconductor shortages triggered by embattled chip maker Nexperia. The recent intervention by the Dutch 🇳🇱 government to seize control of Nexperia, citing the rarely-used “Goods Availability Act”, last invoked during the Cold War, has ignited a significant escalation in tensions with Beijing.

🔹Nexperia Netherlands was acquired by Chinese🇨🇳 Wingtech Technology in Oct 2018. Under the Chinese ownership the company revenue grew, while being profitable and paying off the acquired company's debt. Nexperia was efficiently delivering more than 90 billion components a year. Volkswagen warned the China-Netherlands Nexperia dispute could lead to short-term efforts on production.

🔹In the official court documents, it is very clear that the underlying reason driving the eventual takeover of the company were the prospect of escalation in U.S. trade sanctions under the 50% rule, which was officially released on September 29th. A detailed timeline of the events described in the legal brief clearly show that the entire series of events were instigated by the addition of Wingtech, which indirectly owned/controlled 100% of Nexperia, to the Entity List.

🔹Companies that have wholly owned subsidiaries can typically appoint directors and indirectly, executives. The owners generally have unrestricted access to funds. Wingtech paid $3B+ in 2018 for that right. It is only because Wingtech was placed on the Entity List that these new sets of restrictions were placed on its corporate governance rights on the company.

🔹Thus it is clear that the Nexperia case is direct fallout from the trade/tech war between the U.S. and China. The prospect of FDI and acquisitions being seized in the future dampens the ability for Chinese companies to invest. Chinese companies have already gotten the message loud and clear on the U.S. 🇺🇸but now they are seeing it in certain European countries.

🔹This exceptional move sparked immediate retaliation from Beijing, which imposed export controls on Nexperia’s China operations, escalating the global tech decoupling crisis. The most dependent companies in Europe for components from frozen and sanctioned Nexperia are VW, BMW, Stellantis, Bosch, ASML, Siemens, and Airbus. By withholding essential semiconductors, China could leverage its position in the global market, affecting industries worldwide.

🔹Nexperia, now under Dutch government control, produces large volumes of chips in the Netherlands. The majority are packaged in China and sold mostly to distributors. Today, October 23rd, Nexperia's Chinese unit has resumed supplying semiconductors to local distributors. As part of the resumption, which is confined to domestic trade, all sales to distributors must now be settled in Chinese yuan, whereas transactions had previously only used foreign currencies such as the U.S. dollar.

Video source: Egypt's QNews

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