Why European Automakers Are Opposing Dutch Sanctions

The Dutch government's recent measures against Nexperia have rapidly escalated into a major industry dispute, prompting urgent intervention from European automakers and exposing the deep interdependence of global supply chains. Reports indicate that Volkswagen Group CEO Oliver Blume traveled to The Hague to press Dutch Prime Minister Mark Rutte for a resolution, warning that unresolved restrictions could force widespread factory shutdowns. Executives from BMW and Mercedes‑Benz have maintained continuous contact with Dutch authorities, urging prompt negotiations with Chinese counterparts, while the European Automobile Manufacturers Association, led by Secretary General Sigrid de Vries, has called for swift, pragmatic solutions from all parties.

At the center of the controversy is Nexperia’s ownership history and its operational footprint. Nexperia, historically derived from Philips’ semiconductor arm and later part of NXP, became an independent player and emerged as the world’s largest supplier in certain power‑semiconductor niches. In 2019, Wingtech Technology, a major Chinese ODM, completed the acquisition of Nexperia. Although Nexperia has operated as a separate entity since the takeover, the Dutch government on September 30 imposed a temporary ban citing governance concerns, and Nexperia’s board subsequently adjusted voting rights and placed Wingtech’s stake under trustee control. This sequence followed Wingtech’s designation on the U.S. Commerce Department’s Entity List in December 2024 and related U.S. requests regarding executive changes, steps the Netherlands appears to have followed.

The intervention and China’s countermeasures have quickly revealed the fragility of the automotive semiconductor supply chain. Approximately 70% of Nexperia’s manufacturing capacity is located in China, while its Dutch operations concentrate on design and R&D. In response to the Dutch measures, Chinese authorities suspended licenses for Nexperia’s Chinese production lines and restricted exports, prompting Nexperia to warn more than 20 automakers, including BMW, Volkswagen and Ford, of potential supply interruptions and leading to postponement of deliveries scheduled between late October and early November.

Industry bodies have issued stark warnings: the European Automobile Manufacturers Association cautioned that, absent a timely restoration of supply, European vehicle production could face short‑term halts. Procurement officials at Volkswagen indicated existing chip inventories would sustain operations for only about three weeks, with the Wolfsburg plant reportedly nearing stoppage; Mercedes‑Benz and BMW face comparable risks. U.S. automaker Ford likewise anticipates production adjustments beginning in November and has signaled intent to hold the Dutch government responsible for associated losses.

The outsized impact of a single supplier stems from the structural characteristics of automotive semiconductors. Unlike consumer chips, automotive‑grade devices require stringent process controls, specialized testing and certified packaging, constraining the ability to rapidly scale alternative production. A modern vehicle can contain upwards of 3,000 semiconductor components spanning a wide range of process nodes and functions, and many suppliers operate under long‑standing production schedules and capacity agreements that limit short‑term flexibility. Nexperia’s vertical integration—encompassing design, wafer fabrication and packaging—renders it difficult to substitute quickly in critical product lines.

Power semiconductors, Nexperia’s core offering, are essential for electric motor control and many vehicle electrification functions; they also play key roles in conventional vehicles for systems such as electronic stability control and electric power steering. While advanced materials like silicon carbide are gaining attention for higher performance, many applications still rely on established semiconductor technologies. Estimates place the value of power‑semiconductor content at roughly $450 per electric vehicle versus under $100 for a traditional internal‑combustion vehicle, illustrating that even relatively low‑cost components can be decisive for production continuity.

Compounding the disruption, China tightened controls on rare earth exports—materials supplying about 85% of certain semiconductor inputs—further constraining the ability to ramp production outside China and limiting Nexperia’s capacity to shift output to facilities in the Netherlands. That dynamic intensified supply warnings downstream and catalyzed coordinated pressure from European and American automakers on both Nexperia and Dutch authorities.

Historically, investment emphasis in the semiconductor sector has favored cutting‑edge process nodes, while mature, cost‑sensitive segments such as power semiconductors received comparatively less strategic attention. Since Wingtech’s acquisition, Nexperia has expanded its automotive footprint, with Europe accounting for roughly 40% of its market and annual revenues approaching $2 billion. The current disruption has therefore prompted a reassessment of risk related to foundational chip supplies and underscored the significant, if understated, influence of low‑cost components in the automotive value chain.

While the incident may spur longer‑term changes in sourcing strategies and supply‑chain resilience, the immediate reality is that globalized manufacturing advantages remain difficult to replace. In the short term, automotive production continues under strain as industry participants seek diplomatic and commercial remedies to stabilize supplies and avert broader production disruptions.