【By Observer Net, Ruan Jiaqi】
As the lamentations of American, European and Japanese automakers have not yet subsided, the "supply disruption" crisis triggered by the Netherlands seizing a Chinese semiconductor company is spreading to Latin America.
According to Reuters on the 28th, on Tuesday, after meeting with the president of the Brazilian National Association of Vehicle Manufacturers (Anfavea), Uallace Moreira, secretary of the Ministry of Development, Industry, Trade and Services of Brazil, said that if the global chip supply crisis continues, some automakers may suspend production operations in Brazil within the next two to three weeks. He also revealed that the Brazilian government is communicating with China to seek a solution.
Anfavea was established on May 15, 1956, representing foreign automobile manufacturers with business and production facilities in Brazil. Members include Audi, BMW, Fiat, Ford, General Motors, Honda, Hyundai and Toyota.
According to reports, the Vice President of Brazil and Minister of Development, Industry, Trade and Services, Geraldo Alckmin, also attended the meeting. Moreira did not specify which Brazilian carmakers would be hit first, but mentioned that due to calls for dialogue from the private sector, Alckmin has contacted the Brazilian ambassador to China and the Chinese ambassador to Brazil to promote relevant discussions.
Reuters pointed out that the trigger for this crisis is the Dutch government's forced takeover of Wanxiang Technology Holding's Amphenol Semiconductor. Media reports found that after the Dutch intervention, the Dongguan factory of Amphenol Semiconductor limited shipments after the National Day and Mid-Autumn Festival holiday, causing a "tremor" in the global automotive supply chain, leading to widespread lamentations among American, European and Japanese automakers.
The Wall Street Journal reported on the 28th, citing informed sources, that production disruptions caused by shortages of simple microchips are making automakers increasingly anxious, and a "production shutdown" trend among global automakers may be about to begin.
Amphenol Semiconductor produces semiconductor wafers in Germany and the UK, then sends them to China for packaging and testing, with about 80% of the final products completed in China. The company's revenue last year was approximately $2 billion, with 60% coming from automotive-related businesses.
The report stated that after the seizure incident led to a "supply disruption," the chip inventory of some automakers and suppliers has already been low, and it may be depleted in the coming days. Corporate executives and analysts warned that if Amphenol Semiconductor cannot resume supply in the near future, due to the wide application of its chips, finding sufficient alternatives will be very difficult.
Chip expert Martin Geißler previously told the German newspaper Handelsblatt that only a few suppliers worldwide can theoretically replace Amphenol Semiconductor's products; more importantly, its components have been deeply integrated into many customers' supply chains. "About one-third of companies in the automotive supply chain actually rely on this Chinese company as their sole supplier."
Håkan Samuelsson, CEO of Volvo Cars, added, "Although these components are not high strategic products, there are hundreds of such small microprocessors in cars, such as in door lock systems, air conditioning controls, and speedometers."
This means that automakers cannot simply solve the problem by temporarily purchasing alternative chips or adjusting production plans. "This is a high-level issue beyond our control."
Volvo Cars and Volkswagen Group had warned last week that if the deadlock is not resolved, their European factories might be temporarily closed. Bosch also said that its German production lines may be affected, and employees may be required to take leave.
According to US media reports, Japan's Honda has also started implementing temporary production cuts and shutdowns at its North American factories this week.
Employees of Amphenol Semiconductor walking through a clean room. Oriental IC
Vito Beato, president of the Canadian Auto Workers Union (Unifor) branch, revealed that on Monday, Honda's assembly plant in Aylmer, Ontario, Canada, had cut its capacity in half, and the reduced production status would continue until Wednesday. The plant is responsible for producing the Civic sedan and CR-V SUV.
In a video he posted on Facebook, he also mentioned that the plant plans to shut down for a week starting Thursday, and then resume half of its capacity later next week.
A spokesperson for Honda said the company is "dealing with semiconductor supply chain issues across the industry" and is managing existing component inventories through strategic adjustments. The spokesperson confirmed that Honda has begun taking adjustment measures at its "large-scale production" automotive factories in North America this week, including temporary shutdowns.
Jim Farley, president and CEO of Ford Motor Company, told analysts that the U.S. government is also intervening to mediate the matter. Last week, he went to Washington to discuss the issue and strive to resolve it before the shutdown.
Barclays analysts stated in a report this week that although many suppliers believe there are substitutes for basic chips, the problem lies in limited inventory. Most suppliers usually hold two to three weeks of inventory.
The report said that chip shortages could impact automotive suppliers as early as this week. If the stagnation of the basic chip supply chain continues, "the impact may spread beyond the automotive industry."
The German Machinery Manufacturers' Association (VDMA) also told US media that manufacturers of generators, construction machinery and agricultural machinery will also be affected.
In response, an Amphenol Semiconductor spokesperson cited the company's previous statement, saying that they are currently applying for regulatory exemptions and trying to mitigate the impact, but there is no clear answer on when supply will resume.
Chinese authorities earlier responded, emphasizing that China firmly opposes the Dutch government's generalization of the concept of national security and direct interference in corporate internal affairs. Such actions not only violate the spirit of contract and market principles, but will also severely damage the Dutch business environment, harming both sides.
Meanwhile, the Dutch government, which has caused a major disaster, is trying to shift the blame onto the Chinese team.
According to a Reuters report on October 27, four Dutch sources familiar with the government's thinking defamed the parent company of Amphenol Semiconductor, the leading Chinese semiconductor enterprise Wanxiang Technology, claiming that the reason the Dutch took action in September was because of concerns that the Chinese team would dismantle European operations and transfer production to China.
These sources said that the Chinese team had planned to lay off 40% of Amphenol Semiconductor's employees and close the company's research facility in Munich, Germany. They also said that by October 1st, the Chinese team had transferred "confidential" information from the Manchester factory in the UK, including chip design and machine settings, and planned to transfer physical equipment from the Hamburg factory.
However, they provided no evidence and even hoped that the Dutch government could negotiate with China to reach a solution, reorganizing the Amphenol Semiconductor management into a unified "Dutch-China structure".
Last week, Amphenol Semiconductor (China) Co., Ltd. published a letter to customers via WeChat official account, publicly responding to the doubts raised by the management of Amphenol Semiconductor in the Netherlands, emphasizing that its Chinese entity operates independently according to law, and accusing the Dutch side of "spreading false information."
The Financial Times reported on the 28th that a spokesperson for Wanxiang Technology directly pointed out the Dutch intentions, saying that "it seems that the Dutch want a new local Dutch company to take over Amphenol Semiconductor." However, any company that takes over will "surely fail," because "customers will not follow the new company."
The spokesperson also pointed out that if the Chinese and European businesses are cut off, Amphenol Semiconductor would lose most of its "back-end capacity," and "this capacity gap cannot be filled by Europe or other regions in the foreseeable future."
The Dutch Financial Daily reported on the same day that Wanxiang Technology criticized the Dutch government's "intervention" actions in its official response, urging the Dutch government to return the company's control, saying, "Only in this way can the Netherlands start to repair its damaged reputation, ease international tensions, and protect its own and Europe's economic security."
Rare earth supply and the Amphenol Semiconductor issue have seriously affected the European automotive industry, causing anxiety among EU member states.
Several days ago, Germany, France and the European Commission repeatedly made tough statements through the media, declaring that they would take retaliatory measures against China, and it is not ruled out to use the "nuclear option" in trade. But seeing the large-scale production shutdown crisis facing the European automotive industry, and the Chinese side not yielding, the EU panicked.
According to Bloomberg, on the evening of October 27, the European Commission spokesperson Olov Gil said that China and the EU held the first round of video conference on the 27th, and the Chinese high-level technology delegation will visit Brussels on Thursday (30th) this week to discuss the issue with the EU.
The Financial Times also reported that the EU originally hoped to talk about this issue with China's Minister of Commerce Wang Wen Tao in Europe, but according to insiders, Wang Wen Tao will not accompany the delegation to Europe, so both sides are expected to send "senior technical experts" to discuss key raw material supply and the Amphenol Semiconductor issue.
Earlier, when Wang Wen Tao met with the EU Commission's Commissioner for Trade and Economic Security, Shevchenko, via video conference, he stated that regarding the Amphenol Semiconductor issue, China firmly opposes the generalization of the "national security" concept, hopes that the EU will play an important constructive role, urges the Dutch government to adhere to the spirit of contract and market principles, and put forward a proper solution as soon as possible from the perspective of maintaining the safety and stability of the global supply chain.
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