As a dispute between China and the Netherlands over Dutch chipmaker Nexperia, acquired by Chinese semiconductor corporations Wingtech (Wingtech), drags on, Nexperia's China unit is accelerating efforts to build its own supply chain. After wafer supplies were cut off last year due to friction with the Dutch headquarters, the China unit independently reorganized its production, research and development (R&D), and sales systems inside China. Although the China unit is not completely separated from headquarters, it is effectively striking out on its own, using the supply chain rupture as a turning point.
According to Chinese business outlet Jiemian News on the 25th, Nexperia's China unit recently unveiled about 20 new semiconductor products based on 12-inch wafers. The China unit plans to roll out more than 900 12-inch wafer-based products in the third quarter of this year and more than 1,700 in the fourth quarter, then expand product lines every week thereafter.
After Nexperia was acquired by Wingtech in 2019, Nexperia's China unit handled R&D, production, and sales in China. Then last year, as U.S. restrictions on China-related semiconductors tightened, U.S.-China tensions over Nexperia intensified, and in September the Dutch government also took administrative action against Nexperia over concerns that core technology could be transferred to China.
A Dutch court suspended Nexperia CEO Zhang Xuezhong, Wingtech's founder, from his duties and placed most of Wingtech's equity under the control of a third-party administrator. The following October, as a dispute erupted between Nexperia's Dutch headquarters and the China unit over payment terms, headquarters halted wafer supplies to the China factories.
◇ Switching to 12-inch as 6- and 8-inch wafer supplies were cut off
The China unit then began to change a production structure that had depended on headquarters' supplies. It secured new wafer suppliers in China and rebuilt its R&D, production, and sales systems. According to Nexperia's China unit, after the supply was cut off it also lost access to the overseas headquarters' data platform and some business systems.
Over roughly the next 11 months, the strategy the China unit chose was closer to "building a structure that can produce without headquarters" than "resolving the conflict with headquarters." The China unit said it supplied more than 40 billion semiconductors to over 1,000 customers worldwide during this period. Some product lines have now completed a reorganization of China-based supply chains, and by the end of this year the unit plans to eliminate reliance on certain overseas supply chains in three core product lines.
The key is to shift the semiconductor production base to 12-inch wafers. Nexperia's European plants mainly use 6-inch and 8-inch wafers, but the China unit is converting to 12-inch wafers. The China unit said, "Chip output on 12-inch wafers can be 2.2 to 2.5 times that of 8-inch, and up to four times that of 6-inch." However, actual production unit costs can vary by process and product.
◇ Localizing the supply chain… lowering prices and diversifying sales channels
Securing a local Chinese supply chain also affected expense reductions. Nexperia's China unit said the cost of purchasing China-made wafers has fallen about 8% from before, and comprehensive costs by product are down about 10% to 30%. For products where wafers account for a large share of costs, the final product cost could fall by as much as 40% to 50%, it claimed. Based on this cost competitiveness, the China unit cut sales prices of some semiconductor products by 20% to 30%.
It also changed its sales approach. Within a month of the supply cutoff, it rebuilt an online sales network and enabled online purchasing. Moving away from relying on large customers or distributors as before, it aims to respond directly from R&D-stage samples to small and mid-sized orders.
However, it is difficult to view these moves as independence for Nexperia's China unit. The conflict between the Netherlands and China over control of Nexperia is still ongoing, and the China unit's legal status as the China business organization of a global company called Nexperia remains unchanged. Zhang Chuming, CEO of the China unit, stressed, "Independent operations by the China unit are not to confront anyone but to protect customers, employees, and the supply chain."