Volkswagen warns of production halts due to Nexperia chip shortage

Volkswagen is bracing for potential turbulence in its production lines, citing China’s export restrictions on semiconductors produced by Nexperia. The automotive giant issued a warning Wednesday, signaling that temporary outages could be on the horizon if the chip supply disruption remains unresolved.

The announcement follows a stark caution from the German Association of the Automotive Industry (VDA), the leading advocacy group for the nation’s carmakers. The VDA highlighted that the ongoing geopolitical friction between China and the Netherlands over Nexperia ownership could trigger “significant production restrictions in the near future” if a solution to the chip scarcity isn’t swiftly implemented.

While Nexperia doesn’t directly supply Volkswagen, a spokesperson confirmed to CNBC via email that components from Nexperia are integrated into modules provided by Volkswagen’s primary suppliers. This indirect reliance underscores the intricate and often opaque nature of modern automotive supply chains.

“We are actively engaging with all relevant stakeholders to proactively identify potential risks and make informed decisions regarding necessary measures,” the Volkswagen spokesperson stated. While current production remains unaffected, the spokesperson conceded that “given the evolving circumstances, short-term effects on production cannot be ruled out.”

Investors reacted cautiously to the news, with Volkswagen shares dipping 2.2% in afternoon trading in London.

The escalating situation stems from the Dutch government’s recent decision to take control of Nexperia, a semiconductor manufacturer with Chinese ownership based in the Netherlands. The Dutch government justified its intervention by citing concerns that the firm’s technology “would become unavailable in an emergency,” invoking a rarely used law designed to protect essential goods.

China’s response was swift, imposing export controls on Nexperia’s finished products, creating ripples of concern throughout the European automotive industry, which is already grappling with volatile supply chains and the global chip shortage. This move is seen by analysts as a direct response to the Dutch intervention and a potent demonstration of China’s increasing leverage in the global semiconductor market.

The repercussions of this dispute extend beyond Volkswagen, raising broader questions about the resilience and diversification of global supply chains, particularly in critical sectors like automotive and technology. The incident underscores the vulnerability of European manufacturers to geopolitical tensions and highlights the urgent need for strategic investments in domestic semiconductor production to mitigate future disruptions.

Germany’s Economy Ministry has also expressed its concern regarding the unfolding difficulties in chip supply chains, according to Reuters, hinting at the potential for government intervention to address the growing crisis.