On November 24, 2025, a familiar tremor shook the global automotive industry—a chip shortage, but this time with a new twist. The epicenter: Nexperia’s factory in Dongguan, southern China. As automakers scrambled, it became clear that the lessons supposedly learned from earlier crises had not translated into real resilience. The saga, which unfolded over weeks of diplomatic wrangling and supply-chain chaos, has exposed just how vulnerable the world’s carmakers remain to geopolitical shocks and the hidden power of seemingly mundane components.
Nexperia, a Dutch chipmaker now owned by China’s Wingtech Technology, produces low-tech semiconductors. These chips, used in everything from car brakes to electric windows, sell for pennies—fractions of a cent, even—but their absence can bring assembly lines to a grinding halt. When Beijing halted exports after a diplomatic spat with the Netherlands, automakers like Nissan, Honda, and Bosch were forced to slash production. According to Reuters, Bosch had to curtail factory working hours, and Nissan and Honda cut output, all because of a shortage of what many had considered the least glamorous part of their supply chain.
The crisis began when the Dutch government seized Nexperia’s headquarters in Nijmegen, citing concerns that its technology might be transferred to its Chinese parent, Wingtech. In response, China stopped enforcing Nexperia orders in Dongguan and demanded payments in yuan, as reported by Bloomberg. The move sent shockwaves through the automotive sector, especially in Europe, where manufacturers like Volkswagen, BMW, and Mercedes-Benz have deep supply-chain ties to China.
Professor Li Xing of the Guangdong Institute for International Strategies explained the miscalculation: “They (the Dutch) thought they controlled Nexperia, but what they actually control is just one administrative building, the management building. In reality, 70% of the chip assembly and packaging is located in Dongguan, which is very close to me, not far at all. Very close to Guangzhou. So after they did that (seized Nexperia in the Netherlands), the Chinese government decided that Dongguan would no longer enforce Nexperia orders and stop exporting. And once exports stop, the German auto industry and the French auto industry are in trouble.”
After bilateral talks, the Dutch government reversed its intervention, a move China welcomed as a “first step in the right direction” to alleviating chip shortages. Yet the damage was done. The episode revealed that even low-tech components—those often overlooked in strategic planning—can become major levers in global disputes. Ambrose Conroy, CEO of Seraph Consulting, told Reuters, “No one prepared for geopolitical disruption, and they’re still not prepared.”
The European auto industry, particularly German giants Volkswagen, BMW, and Mercedes-Benz, felt the sting acutely. According to Handelsblatt, these companies had invested EUR4.2 billion (US$4.8 billion) in China from 2020 to 2024, hoping to ride the wave of China’s electric vehicle (EV) boom. Yet their combined market share in China plummeted from roughly 25% in 2021 to about 10% in 2025, as local consumer preferences shifted and domestic EV brands gained ground.
Beijing’s export restrictions, imposed after the Nexperia standoff, forced automakers to form internal task forces and instruct suppliers to seek alternatives to Chinese semiconductors. But as Joerg Wuttke, an expert on European trade with China, pointed out, “China is just very, very difficult to replace as a supplier. But again, the rare earth case and the Nexperia case makes people reconsider what to do in the future, and that might be having a second option elsewhere.”
Replacing China’s dominance in chips and rare earths is not a quick fix. Industry analysts expect it will take three to seven years of investment and restructuring just to diversify chip and rare earth supplies. When it comes to lithium refining and battery materials, the timeline stretches into decades. For German manufacturers, who have expanded so deeply into China, the challenge is even steeper than for their American, Japanese, or Korean counterparts. The European Association of Automotive Suppliers (CLEPA) and senior industry executives confirmed that major automakers have now instructed key suppliers to identify permanent alternatives to Chinese semiconductors and to evaluate sources of raw materials that do not rely on China.
Meanwhile, the European Union is adding pressure with policies that urge automakers to cut their China dependence, all while upholding strict emissions targets and considering new fees linked to fleet emissions. The result, as Financial Times reported, is a costly and complicated EV transition at a time when European consumer demand is already weaker than anticipated. Chinese manufacturers, by contrast, enjoy faster transition cycles and lower production costs, allowing them to expand aggressively into the European market.
To stay competitive, German automakers have begun merging “China speed” with “German quality,” investing heavily in local research and development and forming partnerships with Chinese tech firms like Momenta, Alibaba, and Huawei. These collaborations are aimed at leveraging China’s strengths in artificial intelligence and software to produce driver-assistance systems tailored for local road conditions. Yet even with these efforts, the structural risks remain. As Alfredo Montufar-Helu, managing director at Ankura Consulting in Beijing, observed, “The Nexperia episode shows that manufacturers’ strategic vulnerability stretches beyond high-tech components.”
The crisis also exposed the fragility of just-in-time inventory practices. For years, carmakers had relied on the ability to source cheap, plentiful chips at a moment’s notice. But as one executive told Bloomberg, Nexperia’s chips were seen as “very ordinary electronics with low prices,” so much so that some automakers didn’t even bother to prepare alternative supplies. When the crisis hit, Bosch, for example, was caught off-guard despite ordering 200 million euros worth of Nexperia products annually.
Nexperia, for its part, resumed sales to some domestic distributors in late October 2025, but only if they paid in yuan—a further complication for companies accustomed to transacting in dollars or euros. A spokesperson for Wingtech insisted, “The current crisis shows that breaking up international companies harms supply chains and puts key industries at risk.” Nexperia’s own spokesperson noted that the complexity of the global semiconductor industry made it impossible to foresee the full impact of geopolitics.
The Nexperia debacle has left automakers and policymakers alike grappling with a new reality. The days of assuming uninterrupted access to critical components—no matter how low-tech—are over. As the dust settles, the industry faces a hard truth: building true supply-chain resilience will be expensive, time-consuming, and, for now, incomplete. But if there’s one lesson the global auto sector can no longer ignore, it’s that the smallest chip can bring the mightiest engine to a stop.
