A trade dispute between the United States and China over a little-known Dutch microchip maker could shut down auto factories and drive up car prices.

Few car buyers have heard of Nexperia. But this Dutch company makes chips essential to making cars – and it is now at the center of a trade conflict that could close global car factories and drive already record car prices even higher.

This dispute is just one aspect of broader trade tensions between the United States and China. The Nexperia saga began in earnest last December when the U.S. Commerce Department placed Nexperia’s parent company, China’s Wingtech Technologies, on a list of companies facing trade restrictions.

Then, last October, China’s Ministry of Commerce banned Nexperia China and its subcontractors from exporting finished components and specific subassemblies made in China. The Dutch government took control of Nexperia following this decision.

The tensions have raised concerns about possible auto plant shutdowns because chips made by Nexperia are critical to assembling the cars and trucks they are installed in. The fear is that the trade conflict could halt Nexperia’s production of chips and make it difficult to replace them.

It is unclear when and if auto factories will be forced to shut down operations. But one similar chip shortage following the pandemic, the temporary closure of factories led to a significant drop in the supply of new cars for more than a year. This shortage in turn helped raise the price new and used cars.

Vehicles have become more dependent on computer chips, transistors and diodes for everything from adjusting the driver’s seats to supplying the engine with the appropriate amount of fuel and providing stopping power. Vehicles cannot be completed if these critical components are not available.

Although Nexperia is little known outside the industry, its site says the company has more than 6,000 products qualified for use in automobiles and ships 110 billion of its products annually. It has 12,500 employees in Europe, Asia and the United States. The company said it was working on business continuity plans and was “confident a solution will be found.”

But automakers’ trade groups are less confident and have sounded the alarm about possible auto plant closures.

“If automotive chip shipments do not resume – quickly – it will disrupt automotive production in the United States and many other countries and have a ripple effect on other industries,” John Bozzella, CEO of the Alliance for Automotive Innovation, a lobbying group of most major automakers, said in a statement. “This is so important. We are calling for a swift resolution, so that the U.S. and global auto industry stays on track.”

The Association of European Automobile Manufacturers said it would take months to get new supplies of the components its members receive from Nexperia, while the chip supply is expected to last only a few weeks.

“Automakers have taken steps in recent years to diversify their supply chains, but the risk cannot be reduced to zero. This is a cross-industry issue that affects a large number of suppliers and virtually all of our members,” Sigrid de Vries, director general of the European associations, said in a statement.

“We suddenly find ourselves in this alarming situation,” she added. We really need rapid and pragmatic solutions from all countries concerned.

Nexperia makes about 40% of automotive chips in the segment of the market that includes transistors and diodes, according to Ian Riches, vice president of the global automotive practice at research firm TechInsights.

Automakers are already being forced to deal with rising costs due to tariffs imposed by the Trump administration. While many are absorbing the costs so far, Kelley Blue Book released an estimate last week that the average price of new cars in the United States is just exceeded $50,000 for the first time.