The letter, which was dated October 29 and signed by Nexperia interim Chief Executive Officer (CEO), Stefan Tilger, said the company imposed the suspension on supplies to its plant in Dongguan, in southern China’s Guangdong province, on October 26, saying it was “a direct consequence of the local management’s recent failure to comply with the agreed contractual payment terms.”

Since earlier this month, Nexperia has been locked in a dispute with its Chinese unit after the Dutch government took control of Nexperia from its Chinese owner Wingtech Technology on September 30.

It also removed its Chinese CEO, citing concerns that its technology could be appropriated by Wingtech.

Nexperia’s move came after the Dutch chipmaker’s Chinese unit resumed supplying semiconductors to local customers but stipulated that all sales to distributors would need to be settled using the Chinese Yuan.

Previously, transactions had been settled with foreign currencies like the United States Dollar. The company produces large volumes of chips in the Netherlands that are widely used in the automotive and consumer electronics industries.

Some 70% of the Netherlands-produced chips are packaged in China and sold mostly to distributors.

“While we have maintained shipments for as long as commercially feasible, continuing the current flow of supply from our front-end sites is no longer justifiable,” the letter said.

“Unless these contractual obligations are fully satisfied, we cannot resume wafer supply to the site. Nexperia is developing alternative solutions to ensure (that) supply (is) continuing to our customers.”

Nexperia added that the decision did not reflect an intention to withdraw from its site in Dongguan or from the Chinese market as a whole, adding that it remained committed to finding a resolution to the problem.

Nexperia said it is financially independent of Wingtech and it does not raise capital from Wingtech, the letter showed.

–Reuters–