Nexperia chip production is being accelerated to China due to ministerial action

That's what former CEO Frans Scheper of Nexperia said on RTL Z. He advocates for the minister to quickly enter into discussions with the Chinese, also in the interest of the European buyers who use those chips.

Ministry intervened harshly

The Ministry of Economic Affairs feared that Nexperia would move chip production from Europe to China. This would mean the loss of one of Europe's largest chip manufacturers.

The ministry therefore took unprecedentedly drastic action last month, seizing control of the Nijmegen-based company. But Frans Scheper, who was the CEO of Nexperia until 2020, fears the intervention is counterproductive.

Chinese influence

In any case, according to Scheper, there's nothing new under the sun. When Nexperia was acquired in 2019, he said, it was already clear that Chinese influence would increase.

Nexperia's board of directors at the time was against the takeover, Scheper explains. From the outset, Zhang Xuezheng, CEO of Wingtech, which acquired Nexperia, made it clear that he wanted to make it a Chinese company, Scheper adds.

"One of the first steps was to succeed me as CEO, replace the CFO and also a number of other people in management, so it was really already very clear what was going to happen."

The Ministry of Economic Affairs and the Ministry of the Interior were also aware of this at the time, and they were also aware of Xuezheng's reputation, which was not uncontroversial, according to Scheper. Xuezheng was reprimanded by the Chinese regulator last year. What punishment he received is not known exactly, but he resigned as CEO of Wingtech shortly afterward.

'Better handled differently'

Scheper can understand that the minister has now intervened, but he says he cannot imagine that this could not have been discussed in a different way before.

The so-called wafers, which are manufactured in Nexperia's factories in Hamburg, Germany, and Manchester, UK, are shipped to factories in Asia, including China, to be cut to size, tested and packaged.

But Xuezheng has built a new factory in China, which can take over production from Nexperia's European factories. Scheper fears that this will now most likely happen more quickly.

European customers

He believes this will affect Nexperia's jobs in Nijmegen, where chips are developed and its headquarters are located. Scheper also fears that the supply chain for many industrial companies in Europe will be jeopardized. Nexperia has a very large market share in Europe, particularly in the automotive industry, he explains.

If production moves to China, supplies to European customers will be the first to be halted. Distributors may still have some inventory, but Nexperia produces around 100 billion chips a year, and no one has that in stock, according to Scheper.

And switching to other suppliers isn't an option, he says, because they don't have excess production capacity. Scheper believes it won't be long before there's widespread panic among customers.

Minister Karremans must now enter into discussions with the Chinese government very quickly to find a solution, he concludes.

In this video, you'll see reporter Bart Reijnen express his surprise: chips look like a city full of skyscrapers: