On the Dash:
- Honda cut production at its Ontario plant due to a shortage of Nexperia chips, with reduced output expected to continue next week.
- Geopolitical tensions between the Netherlands, China, and the U.S. have halted Nexperia chip exports from China, affecting basic vehicle components used globally.
- Automakers are seeking alternative supplies, but limited inventories and approvals mean production disruptions could extend beyond North America.
Automakers worldwide are confronting new production challenges as a shortage of basic microchips disrupts operations, beginning this week at Honda plants in North America. The shortage follows Nexperia, a Netherlands-based chipmaker, halting exports from China due to a geopolitical dispute involving the Dutch, Chinese, and U.S. governments. Honda has already cut production by half at its Alliston, Ontario assembly plant, slowing output of Civic sedans and CR-V SUVs through early next week.
While Nexperia may not produce the most advanced semiconductors, automakers widely utilize its chips in systems such as locks, climate control, and speedometers. This extensive dependence on these components makes it difficult to find alternatives, leaving automotive manufacturers vulnerable if shipments are delayed.
Notably, Volvo CEO Håkan Samuelsson alluded that resolving the issue will require “high-level” government intervention, underscoring the industry’s limited ability to act independently. Meanwhile, Ford’s COO Kumar Galhotra warned that without swift action, the shortage could lead to significant Q4 production losses across the industry.
The disruption stems from a series of regulatory actions. The Dutch government seized control of Nexperia after concerns that its CEO was shifting production capacity, financial resources, and intellectual property to China. In response, China ordered Nexperia’s parent company to suspend exports, affecting roughly 80% of the chips processed before reaching customers. EU and Dutch officials are actively negotiating with China, and they have scheduled talks in Brussels to restore exports. U.S. automakers are also working with government officials to resolve the crisis.
However, the potential impact goes beyond the automotive sector. Machinery and equipment manufacturers in construction, agriculture, and power generation also rely on Nexperia chips. Key suppliers, including Bosch, are preparing schedule adjustments but have not yet halted production. Analysts note that while the current disruption is less severe than previous semiconductor crises, suppliers typically maintain only two to three weeks of inventory, meaning shortages could affect production rapidly if the issue persists.
