(News Bulletin 247) – Forvia, which published its third quarter sales, is suffering on the Paris Stock Exchange this Monday, October 20. The fault is not in the publication but in the cautious tone of the management on the bickering between the Netherlands and China around the chip manufacturer Nexperia.

Automotive equipment manufacturers are used to experiencing big stock market rodeos after a publication. This Monday, Forvia once again suffered pronounced sales after the publication of its third quarter sales. The stock fell 7% at the start of the afternoon, dragging the other French equipment manufacturer Valeo (-2%) and the German Aumovio (-2.6% in Frankfurt) somewhat in its wake.

However, according to an analyst specializing in the sector, it is not the company’s publication which explains the fall in the stock.

“I think this is due to management’s cautious message on Nexperia, which brings back bad memories of 2021 (year from which the automotive sector experienced a semiconductor supply crisis, Editor’s note). In these situations, even if a single component is missing, the car is not ready,” explains this analyst.

“They publish first and as a result they are penalized” on this risk on the stock market, he further notes.

Beijing takes countermeasures

Nexperia is a semiconductor company that has become the bone of contention between The Hague and Beijing. This group based in Nijmegen, the Netherlands, is the subsidiary of Chinese Wingtech Technology. The company specializes in electronic components, particularly for the automobile industry. Wingtech bought this Batavian group, a former subsidiary of Philips, in 2018.

On September 30, the Netherlands invoked a Cold War-era national security law (1952) to take control of Nexperia. According to Reuters, The Hague highlighted fears of potential technology transfers to China to justify this decision.

“The Dutch government will not take control of Nexperia but it will now have the power to cancel or block management decisions it considers harmful. The company’s regular production continues,” Reuters explained.

Obviously, Beijing did not welcome the news with a smile, opposing The Hague’s decision. The Chinese government has also banned Nexperia from exporting certain finished components and subassemblies produced in China to the Netherlands. Problem: Nexperia is essential in the global automotive production chain.

ACEA sounds the alarm

“Nexperia chips are present in all types of automotive electronic modules, it is a low value product, but produced in large quantities,” explained UBS in a note published last week.

“We therefore believe that any escalation of the underlying conflict would affect the entire sector, as it could lead to widespread production shutdowns at manufacturers and suppliers. Based on our checks with manufacturers, the necessary chips are still being produced, but are not being shipped to suppliers,” UBS wrote again.

The subject turns out to be critical, to the point that the European Association of Automobile Manufacturers, ACEA, has sounded the alarm.

“On October 10, automobile manufacturers and their suppliers received a notification from Nexperia describing a series of events that prevent them from guaranteeing the delivery of their chips to the automotive supply chain,” warned the association in a press release published last Thursday.

“Nexperia is a major supplier of semiconductors, often used in electronic control units for vehicle electrical systems, for example,” she added.

“Task force”

Coming back to Forvia, the group’s managing director, Martin Fischer, was questioned by analysts during the conference call following the company’s publication on this risk.

The manager assured that the group was monitoring the situation and its developments, while Forvia uses components from Nexperia in its “electronics” division. Martin Fischer explained that the company had used “its voice” with the authorities to alert them of the impacts of the situation.

The group has also set up a “task force” (a dedicated team) to take measures to compensate or minimize the impacts. Basically “we buy all the chips on the market that can be bought and we look at alternatives,” said Martin Fischer.

As for the publication of Forvia, strictly speaking, it does not seem to trigger passions. Oddo BHF notes that the company’s revenues were in line with expectations, with Forvia publishing a turnover of 6.12 billion euros against a consensus (the average forecast of analysts) placed at 6.04 billion euros. The company also reiterated its objectives for 2025.

“Overall, Forvia’s performance in the third quarter should not create any surprises, and confirmation of the outlook for the financial year was widely expected,” concludes Oddo BHF.