European Automakers Face Supply Chain Disruptions Amid Nexperia-Chip Crisis

European automakers, including Germany's Volkswagen, are bracing for supply chain disruptions due to Beijing's halt on exports of Nexperia's chips. The Dutch government's takeover of the Chinese-controlled chipmaker, which caused the export ban, has sparked concern among carmakers reliant on the company's semiconductors. Volkswagen warned that production could be affected by the shortage, while other German automakers like BMW and Mercedes-Benz are exploring alternatives to mitigate the impact. A lasting disruption could affect many European automakers, analysts say, as several hundred chips are necessary to make every car function.

Key Takeaways:

Volkswagen warned that supply-chain disruptions linked to Nexperia could affect production of many of its models, which rely on semiconductors to power systems like blinkers, windshield wipers, and warning lights.
Nexperia's chips are assembled in China, and the Dutch government's takeover of the company has led to Beijing's halt on exports, causing a supply chain disruption.
Other German automakers, including BMW and Mercedes-Benz, are exploring how to avoid shortages to their supply chains.
The German government convened an emergency meeting with leading carmakers and their suppliers to explore options to further diversify automotive supply chains.
Volvo Cars, owned by Geely of China, has not experienced immediate impact but could be affected by wider disruptions to the supply chain.
Automakers have taken steps to diversify supply chains since the Covid-19 pandemic lockdown, but risk cannot be mitigated down to zero.
Nexperia operates a complex, global supply chain typical of chip manufacturing, with factories in Britain and Germany, and assembly and testing in China, the Philippines, and Malaysia.
Substituting Nexperia chips is not expected to be straightforward or fast, due to the need for replacements to meet strict automotive safety standards.
In a "worst-case scenario," German car production could fall as much as a third; a 10 percent fall is more likely, according to analysts at Deutsche Bank.

Statistics:

70% of the world's rare earths are mined in China.
90% of the global supply of rare earths is subject to chemical processing in China.
Nexperia designs older types of chips used in cars and electronics and employs thousands of people across Europe, the United States, and Asia.
Several hundred chips are necessary to make every car function.
European automakers are heavily reliant on Chinese chip suppliers, making it nearly impossible to avoid dealing with the Chinese.

Sources:

[1] The New York Times
[2] Reuters