Alarm bells ring in the automotive industry over the possibility of a new chip shortage

The global car industry is bracing for another semiconductor shock, this time triggered not by pandemic disruption but by geopolitics. Dutch chipmaker Nexperia, a critical supplier of basic automotive semiconductors, has warned it can no longer guarantee deliveries, sending tremors through manufacturers already wary of supply chain fragility.

What is the problem in the chip supply chain?

Nexperia, headquartered in Nijmegen, produces billions of discrete components, tiny but essential chips that regulate power, lighting, and safety systems in vehicles. The firm controls an estimated 40% of the global market for these parts, making it a cornerstone of modern car production. When the Dutch government intervened in the company’s operations earlier this month, citing national-security concerns over its Chinese parent, Wingtech Technology, the move quickly spilled into the international trade arena.

China responded by tightening export controls on Nexperia’s facilities in Shanghai and Suzhou, where a large share of the firm’s output is packaged and assembled. Within days, automakers began warning that inventories of these chips could run dry within weeks if the standoff continues.

Which cars could be affected?

European manufacturers such as Volkswagen, BMW, and Stellantis are now assessing exposure within their supply chains, while the European Automobile Manufacturers’ Association (ACEA) urged governments to “resolve the issue swiftly” to prevent cascading production stoppages. Many assembly plants still operate with minimal buffer stocks, a vulnerability exposed during the 2020–23 global chip shortage, when carmakers lost millions of vehicles’ worth of output. U.S. production is said to be very much at risk.

Even though the affected semiconductors are considered “low-tech,” replacing them is neither quick nor simple. Each component must be re-qualified to meet safety standards, a process that can take months. “It’s not about computing power... it’s about ubiquity,” said one industry analyst. “If a simple transistor is missing, you can’t build a car.”

For now, production lines remain open, but time is tight. The ACEA has warned that the first disruptions could hit as soon as November if shipments remain blocked.

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