Tensions between Europe and China over semiconductors have rattled the auto industry, raising fresh fears of stalled assembly lines across continents. Carmakers and suppliers say growing trade measures and export controls could choke key chip flows that modern vehicles depend on.
EU-China chip disputes alarmed carmakers amid concerns it could halt global car productions
The concern comes as policymakers weigh new restrictions and responses tied to national security and industrial policy. Automakers worry that even limited curbs could trigger a wider supply shock, similar to the disruption that hit the sector in 2020 and 2021.
What set off the warning
European officials have increased scrutiny of advanced technology trade with China, while Beijing has tightened controls on certain chipmaking inputs. These moves add friction to a supply chain that threads through the Netherlands, Germany, Taiwan, South Korea, and China.
Industry executives say the risk is not only high-end processors. Basic microcontrollers, power management chips, and sensors—often made on older production lines—can halt a factory if even one part is missing.
Why chips matter to cars
Every vehicle now depends on electronics for engine control, braking, steering, airbags, and infotainment. Electric and hybrid models need even more power chips and battery management systems.
Analysts estimate a modern car uses hundreds to thousands of semiconductors. A shortfall in inexpensive components can delay the delivery of vehicles worth tens of thousands of dollars.
Lessons from the last shortage
During the pandemic-era crunch, consultancies estimate the auto sector lost about $210 billion in revenue and production fell by more than 11 million vehicles in 2021. Plants in Europe and North America idled repeatedly. Buyers faced long wait times and higher prices.
Those scars reshaped strategy. Many carmakers added second-source suppliers, locked in longer contracts, and raised inventory buffers for critical chips. Some redesigned boards to accept alternative parts.
Who could be hit first
Suppliers that rely on mature-node chips are most exposed. These include microcontrollers used in body control modules, sensors for driver assistance, and power semiconductors that manage electric motors and charging.
Small and midsize parts makers with thin margins have less room to carry extra stock. Assembly plants that run just-in-time logistics face tight timelines if shipments slow at ports or customs.
Possible off-ramps
Policymakers on both sides say they seek stability and predictability. European leaders have promoted “de-risking” rather than full separation. Chinese officials have called for open trade in key inputs.
Industry groups are urging coordinated steps to avoid supply shocks. They argue that clear licensing rules, phased timelines, and exemptions for mature-node automotive parts could keep factories running while political talks continue.
What companies are doing now
- Securing dual sources for high-risk microcontrollers and power chips.
- Raising safety stock for mature-node parts at regional hubs.
- Qualifying alternative designs that accept multiple suppliers’ components.
- Mapping sub-tier suppliers to spot single points of failure.
The road ahead
Even a brief disruption can ripple through the sector, from steel stampers to showrooms. A prolonged dispute could tighten inventories, extend delivery times, and keep vehicle prices elevated.
Yet the industry is not where it was in 2021. Better visibility into chip demand, longer contracts, and design flexibility may soften the blow if rules change. The biggest unknown is the scope and speed of any new measures.
The warning is clear: a new chip shock would hit assembly lines first and consumers soon after. Automakers will watch for exemptions on mature-node parts, clearer trade rules, and steady logistics. If those materialize, the sector may avoid a repeat of the last crunch. If not, buyers should brace for longer waits and fewer choices on dealer lots.
