China Resumes Nexperia Chip Supply Amid EU-China Trade Tensions
China has agreed to resume the supply of Nexperia chips for a period of 12 months, with the provision that these chips are limited to civilian use only. This agreement follows the Dutch government's takeover of Nexperia in September, a move that nearly halted European car production and emphasized China's leverage over EU supply chains.
The broader context involves a persistent EU trade deficit with China, estimated at around €300 billion, despite the implementation of EU tariffs and electric vehicle levies. In April, China's export controls on key materials contributed to slowdowns in car manufacturing. German imports, particularly the supply of rare-earth magnets, have come under scrutiny, with companies required to share confidential information to obtain these magnets. Germany imports roughly 95% of its rare-earth magnets from China, highlighting the dependency.
Analysts interpret China's actions as a strategy to weaponize trading relationships to project power and extract advantage, thus posing ongoing risks of supply crises for Europe. In response, the EU is considering policy options including de-risking versus decoupling. The proposed Anti-Coercion Instrument could be used to restrict Chinese imports, a topic that remains under discussion among European leaders such as Ursula von der Leyen, Emmanuel Macron, and officials from Germany. However, full decoupling from China is considered potentially catastrophic for the EU industry, given companies like BMW's significant exposure in the Chinese market.
