The crisis surrounding chipmaker Nexperia has been going on for more than six months, and the Chinese and European branches of the company are still not speaking to each other. Both parties are building an independent production chain to make the simple chips that are widely used in the automotive industry.
However, Chinese investors would prefer to see an agreement between the fighting Nexperia units, especially now that Nexperia’s parent company Wingtech is in trouble on the Shanghai stock exchange. Last week, trading in Wingtech was halted after the price fell too quickly. The price is now around 25 yuan (3.12 euros) per share. Just before the start of the conflict, it was around 45 yuan, the highest point in the past two years.
Wingtech is in danger of losing its stock exchange listing at the end of this year because its accounting firm received insufficient information to complete the annual accounts. In a written explanation, Wingtech blames the European Nexperia branch for this: it allegedly closed access to IT systems in China, preventing the accountant from checking the information. The European head office denies this and reports in a statement that it has fully cooperated with the accountant. “It is not our intention to harm Wingtech shareholders.”
In October last year, the Enterprise Chamber suspended CEO and owner Wing (Zhang Xuezheng) on suspicion of a conflict of interest and stripped him of control over his shares. Shortly before, the then Minister of Economic Affairs Vincent Karremans (VVD) had incurred the wrath of China by temporarily ‘freezing’ Nexperia with an old emergency law.
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In October, China blocked the export of Nexperia chips packaged in Dongguan. This caused problems for car manufacturers all over the world. Although this export restriction has been partially reversed, the Chinese factory has been operating separately from Nexperia BV since October. To compensate for this loss, the European branch of Nexperia is accelerating the expansion of the capacity of its factory in Malaysia.
Since then, the Chinese and European branches have only spoken to each other through lawyers and press releases. Invitations for constructive conversations are declined, Nexperia BV said.
As long as the two warring business units do not make any progress, the hope is for diplomatic consultations. Minister of Foreign Trade Sjoerd Sjoerdsma (D66) has announced a visit to China. The Nexperia dossier will certainly be on the agenda there. Karremans suspended his emergency law last year, but China wants the Dutch intervention to be completely off the table. However, little can be changed about the judge’s decision; the final ruling will not follow until a few months at the earliest. In the meantime, both Nexperias are running far from optimally.
Call for boycott
Chinese Wingtech investors hope for a good outcome, according to a survey NRC. When Roy Cheung saw on April 30 that Wingtech was in danger of losing its stock exchange listing, he posted on Chinese social media platform RedNote that this had never happened to him in ten years of investing. Last October, shortly after the Nexperia conflict erupted, he bought shares in Chinese parent company Wingtech because he was curious, he writes in his post, “how our country would solve it.”
Even now that Wingtech is in danger of disappearing from the stock exchange in Shanghai, Cheung remains confident, he says NRC in chat messages. “The problem is in the Netherlands. If the Netherlands releases Nexperia, Wingtech will certainly rise again.”
There are also other voices in the hundreds of comments under Cheung’s post. Many individual investors are disappointed and wish they had divested their shares sooner. Calls are being made for boycotts of the Netherlands and even Dutch mills are having to pay for it (“I don’t like them anymore either”).
The Dutch intervention at Nexperia is still seen in China as disproportionate and against the rules of international business operations. These questions continued to be asked in the past week: Nexperia was owned by Wingtech. How could this happen? When were foreign companies in China treated like this?
34-year-old Jinken Huang, who works in the e-commerce sector, writes to NRC that as a minority shareholder he understood Dutch steps to address the conflict of interest of the former Nexperia CEO, for example with a temporary suspension. Zhang also did not have a good reputation among Chinese investors. But by also freezing the control of the listed Wingtech over Nexperia, all shareholders were also directly affected.
Huang, who has been investing in Wingtech for three years, explains that most Chinese private investors in the company are in principle in favor of a diplomatic or internal solution. The outcome of the Dutch court’s investigation may take a long time and the protracted conflict between Nexperia BV and the Chinese branch of the company is bad for the company’s performance.
“But now that Wingtech is in danger of being delisted from the stock exchange due to the loss of control over Nexperia, we as private investors can only furiously hope that Wingtech will sue the Netherlands for damages.”
Chip production in China
That will indeed happen, if it is up to Wingtech. The company claims that “the Dutch intervention led to significant operational disruption and financial damage, with losses of more than eight billion dollars for the company and its investors.” Nevertheless, Wingtech’s position is still “operationally and financially solid”.
Wingtech is setting up independent chip production in China with local chip suppliers and a chip factory in Shanghai. The transformation should be complete in the second half of this year. The question remains whether Chinese car manufacturers want to purchase chips from such a local party. For cars intended for export, some Chinese brands still prefer Western components. Automakers are also reluctant to use new ingredients for their vehicles; it takes time to test and qualify parts.
With the cooperation of Wanqing Chen.
