If the automotive industry were a precision machine, its global supply chains would form the complex nervous system keeping it operational. When any single component of this system faces disruption, the entire industry risks paralysis. The ownership dispute surrounding Dutch chipmaker Nexperia, while appearing as an isolated governance issue, has sounded alarm bells about automotive supply chain security.
The Nexperia Case: Tip of the Geopolitical Iceberg
Sapna Amlani, Moody's Supply Chain Director, highlights how the Nexperia incident revealed automakers' vulnerability to geopolitical risks. The conflict began when the Dutch government temporarily took control of China-owned Nexperia citing security concerns, prompting China to suspend semiconductor exports from the company. Although both parties eventually reached a resolution, the resulting supply chain disruption risks persist.
"For procurement leaders, this wasn't merely a temporary disruption but a structural risk revelation," Amlani warned via email. "Geopolitical decisions can instantly reshape procurement landscapes. Even if China lifts restrictions, governance gaps and quality concerns remain. Future risks could emerge from stricter EU controls or retaliatory measures from Beijing."
Automakers' Response to Geopolitical Risks
Amlani emphasizes that operational friction continued even after the Nexperia resolution. Delays in wafer export resumption due to internal disputes between the company's EU and China divisions demonstrate how corporate conflicts can disrupt supply chains as severely as geopolitical events.
Additional pressures come from U.S. tariffs on vehicles and components, coupled with corporate commitments to increase American production capacity. "Supply leaders should develop multiple scenario plans," Amlani advises, "regardless of whether broad exemptions exist."
Building Resilient Automotive Supply Chains: A Dual Approach
Amlani proposes two critical measures to address current and future geopolitical risks:
1. Diversify Procurement with Transparency Focus: Automakers must broaden sourcing for critical components like semiconductors while prioritizing governance and ownership transparency as primary risk factors. This requires thorough supplier vetting to ensure ethical compliance and risk mitigation capabilities.
2. Enhance Visibility Through N-Tier Collaboration: Manufacturers should implement real-time visibility tools to establish deeper connections beyond Tier-1 suppliers. Understanding extended supply network operations enables better risk identification and response.
Multi-Sourcing: The Cornerstone of Supply Chain Resilience
"Many companies now consider multi-sourcing their key resilience strategy," notes Amlani. This involves establishing dual or triple sourcing across different regions—distributing risk among suppliers in Southeast Asia, Europe, and North America.
Standardizing Core Components: Quality Assurance Imperative
Effective multi-sourcing requires standardized core component specifications compliant with Production Part Approval Process (PPAP) requirements—including design documents, engineering change records, material certifications, dimensional results, process flowcharts, and control plans. The process necessitates producing "golden samples" to guarantee quality, supplier accountability, and risk reduction.
Leveraging Traceability Technologies
Automakers must adopt traceability tools and analytical technologies like IoT, blockchain, and quality assurance drift detection to identify subtle manufacturing variations and continuously verify all suppliers' compliance.
Lessons from the 2021 Chip Shortage
"The 2021 semiconductor crisis caused industry-wide profit declines," Amlani observes, "highlighting multi-sourcing's critical importance." The event exposed overreliance on single suppliers and inadequate contingency planning.
Stress Testing: From Project to Core Competency
"Stress testing has evolved from a procurement initiative to an operational core competency embedded in resilient organizations," explains Amlani. Recommended models include annual full-supply-chain assessments plus quarterly tests for critical components like semiconductors and EV batteries.
These evaluations should measure operational restart speed and production sustainability during critical input shortages. Scenario planning must address export freezes, wafer shipment disruptions, tariff escalations, and governance disputes.
Calculating the ROI of Resilience
"The return on investment is clear and validated," Amlani adds. "The 2021 chip shortage losses alone far exceeded the cost of maintaining regular stress testing programs. In many cases, preventing just one disruption justifies the entire investment."
Conclusion: Future-Proofing Automotive Supply Chains
The Nexperia incident serves as a stark reminder that geopolitical risks have become unavoidable factors in automotive supply chain management. To navigate an uncertain future, manufacturers must embrace transformation through diversified sourcing, enhanced visibility, standardized components, advanced traceability, and rigorous stress testing. Only by building resilient, sustainable supply networks can the automotive industry's precision machinery continue delivering value to society.