The Boring Chips That Brought Europe to Its Knees

Welcome to a 🔒 subscriber-only deep-dive edition 🔒 of my weekly newsletter. Each week, I help investors, professionals and students stay up-to-date on complex topics, and navigate the semiconductor industry. If you’re new, start here. As a paid subscriber, you will get additional in-depth content. See here for all the benefits of upgrading your subscription tier!

This is a video essay talking through this post along with key highlights that you can quickly browse through, for paid subscribers only.

While the world was steeping in 100 billion dollar circular AI deals, the rug was pulled out from under the semiconductor industry last week by a single company that produced mundane but essential components for the automotive semiconductor market: Nexperia.

There is plenty of online coverage about what exactly happened. In this post, I will briefly explain what went down, why the automotive industry is a complex beast, and what the road ahead looks like for the European automotive industry.

For free subscribers:

• The Dutch Takeover and End of Chinese Exports

• Understanding Nexperia and Automotive Markets

• The Automotive Qualification Barrier (AEC Standards)

For paid subscribers:

• The Turning of Tables: What happens next, and who are viable replacements for Nexperia.

Read time: 10 mins

The Dutch Takeover and End of Chinese Exports

From Nexperia’s official release:

Due to the same serious managerial shortcomings, the Dutch Ministry of Economic Affairs observed that Nexperia’s operations in Europe were being compromised in an unacceptable manner. This situation raised broader concerns for the Dutch government about the availability of semiconductor products critical to the European industry.

The combination of Zhang Xuezheng’s behaviour as CEO and (indirect) shareholder, as well as concerns about the semiconductor product availability in the Netherlands and Europe, ultimately led to the Dutch government to intervene with an exceptional emergency order on the basis of the Goods Availability Act (Wbg).

The Goods Availability Act was enacted in 1952 for post-WWII reconstruction efforts and allows the Dutch government to control critical goods during national emergencies, and its application to Nexperia was the first time the law was ever used. The Dutch government was prompted to use this historically extreme measure because they believed that the actions of a Chinese entity would undermine their access to critical semiconductor chips. It comes down to two specific reasons: WingSkySemi and US export controls.

Investments into WingSkySemi

A Dutch court ruling contains specific allegations that ...