During the escalation of the U.S.-China trade war this fall, perhaps no story captured the drama and unintended consequences of great power rivalry as clearly as that of Nexperia, a Chinese-owned Dutch company that is one of the largest and most efficient producers of legacy semiconductor chips. Unlike those at the cutting edge of semiconductor technology, Nexperia’s chips are the workhorses of the highly globalized automotive industry, making brands like Honda and Volkswagen dependent on them. But the production of the chips themselves is no less globalized, with wafers produced by Nexperia in Germany or the U.K. and then shipped to Dongguan in southern China for final assembly and packaging.
As a result, the drama surrounding Nexperia this fall threatened to choke off essential semiconductors at a time of great uncertainty for leading European auto firms, which are already struggling to compete with China’s prowess in electric vehicles and its growing dominance as the largest automotive exporter. Beyond that, however, it showed how the era of global economic integration that peaked in the 2010s, epitomized by global supply chains linking technology, products and workers around the world, is now ending.
Nexperia’s structure makes it easy to understand why it got caught up in the escalating geopolitical competition between the U.S. and China. However, it is a mistake to view the Nexperia debacle in particular, or the position of European firms in general, as merely collateral damage of the U.S.-China rivalry. Rather, the conflict over Nexperia represents another nail in the coffin of Europe’s dedication to free trade, global integration and the ideal of mutual economic benefit. How the conflict unfolded also shows that decoupling Western economies from China has its own internal logic that will be hard to avoid, no matter how economically costly doing so will be to both firms and consumers.
