A factory in China’s industrial south has disrupted the automotive chip sector, causing production cuts for Nissan and Honda due to the shortage of semiconductors from Dutch chipmaker Nexperia. The Dutch government took control of Nexperia, but China retaliated by halting chip exports to the West.

China’s dominance over mundane but critical chip components has paralyzed global production, revealing vulnerabilities in automakers’ supply chains. The Dutch government reversed its decision to seize Nexperia, indicating a potential breakthrough, while the industry scrambles to respond to geopolitical shocks and diversify supply chains to mitigate future risks.

Nexperia’s chips, used in car brakes and electric windows, have led to production cuts and supply chain disruptions for automakers like Bosch. The crisis has highlighted the industry’s strategic vulnerability and the need for resilience in the face of unforeseen geopolitical disruptions. Bosch, initially unprepared for alternatives, ordered millions of euros worth of Nexperia products annually.

China allowed some Nexperia exports to resume after a meeting between Trump and Xi, preventing production halts for Bosch and other suppliers. Automakers like Toyota learned from past crises, stockpiling chips to ensure business continuity. The industry faces challenges in diversifying supply chains and preparing for future disruptions, which could be costly and time-consuming.

The integration of Nexperia chips into components like power modules poses challenges for automakers seeking alternative suppliers. Testing and approvals for new components could take up to a year, delaying efforts to secure stable supplies. Automakers are considering building resilience through diversification but face the reality of the high costs associated with such measures.

Read more at Yahoo Finance: How the Nexperia chip crisis upended auto supply chains