Circuits Assembly Online Magazine - Nexperia Crisis Exposes Hidden Fragility in the PCB Supply Chain

Just when the industry thought the shortage saga was over, the parts giant hit refresh on the chaos.

The global electronics industry faces another shortage situation. What began as a governance dispute between the Dutch government and the Chinese ownership of Nexperia has morphed into a geopolitical crisis with wide-ranging impacts on the printed circuit board assembly industry.

Nexperia manufactures discrete semiconductors, including diodes, Mosfets, GaN FETs, IGBTs and analog and logic ICs. These are foundational components that populate virtually every PCB in applications ranging from automotive and home appliances to industrial equipment. The company operates assembly facilities in the UK, Germany and the Netherlands, with final testing and packaging performed in China.

The trouble began in October when Nexperia, headquartered in Nijmegen, Netherlands, invoked the Goods Availability Act to seize control of the firm from its Chinese parent, Wingtech Technology, which acquired the company in 2018. In retaliation, the Chinese government implemented export restrictions on Nexperia’s plant in Dongguan, China, blocking shipments of chips abroad without export licenses. Following these actions, Nexperia Netherlands halted wafer supply to its Chinese arm, citing compliance issues.

In the weeks that followed, China’s Ministry of Commerce granted limited exemptions for the export of some products. Nexperia China emphasized that it held sufficient inventories and alternative wafer supply to meet demand. However, Nexperia’s Dutch management cautioned customers that chips produced in China after Oct. 13 might no longer meet the company’s quality or traceability standards, underscoring a significant breakdown in operational oversight.

As it stands today, Nexperia’s customers and suppliers worldwide remain unsettled, with the majority of the pain felt in the automotive industry, where large quantities of Nexperia’s automotive-qualified components are used. Measures have been taken to mitigate supply chain impacts, including purchasing buffer stocks, qualifying drop-in alternatives and redesigning when possible. The impact of these mitigation efforts by sourcing managers has led some customers across the industry to report shortages and price increases not only for Nexperia products but also for drop-in replacement brands.

Figure 1. Designing for flexibility avoids dumpster-diving for hard-to-find parts.

Why This Matters to PCB Assemblers

On the surface, a discrete semiconductor may seem easily replaceable. For printed circuit board manufacturers, however, this isn’t always the case. For high-reliability customers in the automotive and medical industries, qualifying alternatives may require a lengthy validation process, consuming valuable time and resources. By the time those alternatives are approved, available goods may no longer be readily accessible when customers are ready to proceed.

Missing components at any stage of production can halt manufacturing and leave boards incomplete, tying up working capital. Manufacturers that operate just-in-time job shops with little to no buffer stock are among those facing immediate scheduling impacts.

Although redesigns are possible, many printed circuit board manufacturers are optimized for specific footprints, and redesigning their boards can add engineering workload and delay new product introductions.

And as available inventory tightens, prices in both the secondary market and franchise distribution will increase for both Nexperia products and common drop-in replacements, reflecting the imbalance between supply and demand.

Limited Relief, Ongoing Risk

Reports of a partial easing of Chinese export restrictions have brought some tepid relief to supply chain managers. But as those who have experienced previous supply chain crises know, impacts from any prolonged interruption have a multiplier effect once panic buying sets in, causing the fog of uncertainty to linger well beyond a few weeks.

PCB and EMS leaders should therefore treat the situation as a controlled crisis amid continued uncertainty by employing best practices to mitigate exposure and impact. Recommendations include managing existing supplier inventories to build buffer stocks of critical Nexperia parts and drop-in replacements when possible.

Those who are well diversified against disruption – by using BoM intelligence tools to strengthen their list of qualified alternatives to discrete packages (SOT-23, TO-220, DFN, etc.) – will find relief when they can quickly pivot to available inventory before their competitors. Taking it a step further, designing for flexibility to incorporate multiple footprints and pin-compatible options at the earliest design stage will facilitate faster substitutions.

Finally, as inventory at franchise distributors and manufacturer levels depletes, reviewing secondary approved vendors from the independent distribution and broker markets should be considered, with proper vetting and controls for component sourcing to limit exposure to substandard products entering the market during a prolonged shortage cycle.

Like any shortage, only time will tell how prolonged and impactful the Nexperia event will be on the global manufacturing scale. It is undoubtedly a test of the resiliency of supply-chain managers who had been breathing a sigh of relief in the post-Covid era of inventory oversupply. Events like these will also continue to expose weak points in the assembly practices of global manufacturers who rely on multiple assembly sites to fabricate and finish their products.