Do you remember the automotive chip shortage? Do you remember how much that sucked? This time it’s back, though in a curious way that has nothing to do with a global pandemic or even automaker overreaction. Nope, it’s just politics.
For today’s Morning Dump, I’m going to take a closer look at what happened, what’s happening, and who is maybe going to get impacted the most.
Also, it has nothing to do with chips, but that cheap Kia EV everyone was hoping for ain’t coming anytime soon.
Boo! You’re In The Timeline Where A Dutch V. China Spat Might Ruin Your Day
I feel like calling anything that’s a rerun of a prior event “Blank 2: Something Boogaloo” is extremely Millennial coded. This is amusing because the film (a sequel) was neither very good nor popular, and came out in 1984, which is pretty close to the cutoff for being a Millennial. Why do all Millennials make this reference? Also, why did I not know that Ice-T appears as himself in all three films? [Ed Note: I have no idea what Matt is talking about. -DT]
It’s the things that you don’t know that hit you the hardest. These are Donald Rumsfeld’s “unknown unknowns.”
When the pandemic first paused our lives, back in 2020, production was slowed down for the obvious reason that no one knew how it was spread, so going back to work in person was halted. Car sales also plummeted, and it was assumed car-buying would as well. What was less obvious to those outside the industry was that carmakers halted chip orders, thinking they wouldn’t need the expensive parts.
In retrospect, what wasn’t obvious to most automakers (Toyota is sort of the exception here because Toyota had experienced a chip shortage post-Tsunami and had maintained larger stores) was that a huge rise in demand for personal electronics would shove their chip requests to the back of the line, thus hampering car production for almost three years.
Carmakers, you might assume, have learned the hard lesson. That largely seems to be the case, and no one is cancelling any orders anytime soon. Instead, the culprit is a showdown between the Dutch arm of a company (Nexperia) and its Chinese parent (Wingtech), which itself is kind of a proxy for the conflict between China and the West. Nexperia provides logic chips and transistors to automakers and suppliers.
The short of it is that the Dutch arm of the company accused the Chinese arm of stealing technology and effectively gutting the Dutch operation. Based on the company’s press release, it sounds like employees at the company went to the Dutch government, which led to the dismissal of CEO Zhang Xuezheng and the removal of voting rights from Wingtech.
[T]he 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).
Under this order, Nexperia is prohibited by the Dutch government from relocating company parts, firing existing executives and/or making other decisions without explicit permission from the Dutch government for a period of a year. This order is intended to prevent the goods manufactured by Nexperia from becoming unavailable, thus protecting Dutch and European economic security.
Somewhat predictably, the Chinese arm of the company and the Chinese government didn’t react positively to this development. In addition to denying any wrongdoing, China demanded the reinstatement of the CEO. Where this gets tricky is that Nexperia ships wafers from the Netherlands to its plant in Dongguan, China, which is then supposed to ship final products to customers. Can you guess what happened next?
The spat has heightened tensions between Europe and China, which imposed export restrictions on the Chinese facility following the Dutch government’s move to take veto powers over Nexperia. That meant that although the wafers were being delivered to the Dongguan site, the chips weren’t being delivered to customers outside China.
And now Nexperia is no longer shipping wafers to China, and its Chinese facility isn’t shipping final products to anyone outside China, which means this crisis is going to go on a bit longer. Who got hit?
Toyota Is In The Clear
Remember how I said Toyota is a smart company? From the sidelines of the Tokyo Auto Show, CEO Koji Sato told Automotive News that the company felt prepared for any disruptions:
Is there a risk? Yes, Sato says. Does Toyota face a looming shutdown? No, he assures.
“Currently, we don’t see any big damage for Toyota,” Sato said Oct. 29 on the sidelines of the Japan Mobility Show, adding that the company is closely monitoring the situation.
“There is a little risk, but it’s not going to cause a big shortage of semiconductors all of a sudden,” Sato said. “We have other more serious issues on a day-to-day basis than this.”
Again, this is a company that learned from natural disasters.
VW, BMW, Ford, ZF, Stellantis, And Nissan Are Among The Concerned Companies
It’s one of those crises where it’s easier to just point out who isn’t in the crosshairs, which seems mostly like Toyota, and even then, there’s some risk. Part of the issue is that Nexperia supplies key electronics to both automakers and suppliers, so even if a company doesn’t work directly with Nexperia, it might need a sensor or control unit that has Nexperia parts inside.
ZF, the company that supplies tons of drivetrain components (and just about everything else) to major carmakers, is in the crosshairs according to Bloomberg:
ZF Friedrichshafen, the world’s fourth-largest auto supplier, has cut shifts at its main electric drivetrain plant in Schweinfurt because the availability of important components has tightened, the people said, asking not to be identified because the information isn’t public. ZF supplies most major automakers, including Mercedes-Benz, Stellantis and Ford Motor Co.
And, from this Reuters report, there’s news that there’s a “war room” being set up by one automaker to deal with this:
Industry bodies have sounded the alarm over the possible impact on production, with Stellantis saying on Oct. 30 that it had set up a “war room” to monitor the situation.
Volkswagen said production at its German sites is secured for next week as of Oct. 30, but warned that disruptions remain a risk. Nissan said it had enough chips at the moment to last until the first week of November without disruption.
Some Nexperia products that used to cost just a few Chinese cents have gone up in price to two or three yuan each over the past two weeks, more than 10 times their original cost, according to a source familiar with the matter.
This is obviously great news because cars were getting too cheap and easy to make.
So Much For The Affordable Kia EV4
Thomas wrote earlier this year that he was worried the bug-like Kia EV4 was “too weird for America.” We may never know, because the cheaper EV isn’t coming, according to Inside EVs:
The EV4’s U.S. release is no longer happening, at least for now, a Kia spokesperson confirmed to InsideEVs. “Kia’s full range of vehicles offers meaningful value and inspiring performance to customers,” he said. “However, as market conditions for EVs have changed, the release of the upcoming EV4 electric sedan will be delayed until further notice.”
There’s nothing worse than hearing that a car you might want is delayed “until further notice.”
What I’m Listening To While Writing TMD
One of my favorite film/tv tropes is song you know performed slower by modern female vocalist. It always works on me. I’m not sure if Lana Del Rey’s cover of “Season of the Witch” goes full Nouvelle Vague, but it’s close. It still feels appropriate for today.
The Big Question
Which car has the scariest-looking grille/front fascia?
Top photo: Breakin’ 2, VW, ZF, Nissan
“Which car has the scariest-looking grille/front fascia?”
I don’t know which IS the scariest, maybe it’s an Altima, maybe a Peterbilt but it’s clear who desperately WANTS that title:
https://media.roughcountry.com/media/catalog/product/j/l/jl-jt_slotted_angry_grille-_10496.jpg
Scariest grill? A chrome Peterbilt bearing down on you at 80 mph in the fucking right hand lane.
As someone who is in the Semiconductor industry, you are partially right about automotive chips shortage reasons during the pandemic. The reason I wanted to comment, is that many companies outside of Asia, send their wafers, to Asia to be packaged into the chips you use in products. The labor cost there is much cheaper that in the more industrial world, and very few companies do it here ( My company does it for most of the products we make here).
This can be an issue with other companies doing business with China, and should be a warning.
It’s the clothes, hair, costumes, earnest sincerity, the whole “tough guys don’t fight, they dance” messaging, and everything else over the top about B2:EB that make it a must watch. Every decade has movies that capture their times and could only ever have been made in those specific times. Think Saturday Night Fever, Easy Rider, Metropolis, Wizard of Oz, House Party, etc.
Man, I’m old enough to remember how Toyota was lauded for their Just-In-Time/lean manufacturing and inventory control systems.
How times have changed.
Nexperia is just the start. We might be looking at another chip cold war this time with a drone conflict. Ukraine is building drones with NATO support, partnership and probably some eu funds. China doesn’t allow them to order components directly. But allows the Russians to and has been directly supporting the Russians in several ways. So the Russians are able to get the same components faster probably cheaper directly from China. The Dutch realized this was a defense issue especially with the Russian drone incursions deeper into the EU. The scary thing is china can figure out problems and build stuff quick. Maybe by some miracle the Dutch will get their capacity back online in a timely manner. But given the eu and all the eu bloc governments previous projects this will probably take years to sort out.
“Car sales also plummeted, and it was assumed car-buying would as well”
I’m so confused with this sentence. Aren’t car sales and car buying different sides of the same coin?