The Nexperia Chip Crisis Disrupts Auto Supply Chains Once More

Geopolitical Disruption in Chip Supply: The automotive industry faces a crisis due to geopolitical tensions affecting semiconductor supply, particularly highlighted by the situation at Dutch chipmaker Nexperia's factory in China, which has become a critical choke point for low-tech automotive chips.

Supply Chain Vulnerabilities: Automakers, despite previous disruptions, failed to adequately prepare for geopolitical risks, relying on just-in-time inventory practices that left them exposed when Nexperia's operations were impacted, leading to production cuts for companies like Nissan and Honda.

Currency and Export Challenges: Nexperia's shift to requiring payments in yuan for chip exports and the Dutch government's initial control over the company illustrate the complexities of international supply chains and the challenges posed by currency and trade regulations.

Lessons from the Crisis: The ongoing chip shortage emphasizes the need for automakers to diversify their supply chains and maintain larger inventories, as companies like Toyota have done, while also recognizing that changing established supply chains is a time-consuming and costly process.