The European Commission plans to propose a temporary exemption for the Chinese chipmaker Yangzhou Yangjie Electronic Technology, despite the company being on the EU sanctions list for supplying Russia. European automakers warned that their stocks would otherwise run out within weeks. The proposal requires approval from all 27 EU member states, which could cause further delays.
The European Commission is preparing a temporary exemption for Yangjie, Bloomberg reports. The Chinese company has been on the EU sanctions list since April 23 as part of the 20th sanctions package against Russia. European automakers were quick to sound the alarm. Without an exemption, chip stocks would run out within a few weeks, resulting in paralyzed production lines.
Yangjie was sanctioned after the EU determined that the company had shipped more than 200 shipments of “dual-use” technology to Russia. This refers to equipment or software that can be used for both commercial and military purposes. The EU also has evidence regarding the latter. Yangjie components have reportedly been found in Russian drones and ammunition. At the same time, the company has become indispensable to the European automotive industry.
From the Nexperia crisis to dependence on Yangjie
The automotive industry is still recovering from the Nexperia crisis. After the Dutch government took control of Nexperia last October and China imposed export controls, production lines at Honda, Volkswagen, and Bosch temporarily ground to a halt. Companies turned to Yangjie as an alternative supplier of power semiconductors. That turned out to be a new vulnerability.
Yangjie manufactures various fundamental electronic components: rectifiers, MOSFETs, IGBTs, and SiC components. So, no advanced processors, but rather the building blocks for power control in automotive electronics. Dominik Zillner, CEO of distributor Components at Service, called the loss of Yangjie as a supplier a severe blow to an industry already reeling from the Nexperia issues.
Chip inventories will run out in weeks
Noureddine Seddiqi, CEO of Frankfurt-based chip distributor Sand & Silicon, told Handelsblatt that customers’ remaining Nexperia chip inventories will last only until “July or October.” Alternative suppliers are operating at full capacity, making a rapid switch virtually impossible.
Moreover, the dependence on China runs deeper. About 70 percent of the Nexperia chips manufactured in Europe go to China for backend assembly before being exported. China partially eased its Nexperia export controls in November, but the consequences of the turmoil more than six months ago are still being felt. In addition, Nexperia owner Wingtech, which may be delisted from the Shanghai stock exchange due to the crisis, has a lawsuit pending against the Dutch government. The claim demands that the Netherlands pay $8 billion in damages.