'Big chaos warning' that made 27 countries across Europe change their mind on China

The European Union is reportedly planning to propose a temporary lifting of sanctions on Chinese semiconductor manufacturer Yangzhou Yangjie Electronic Technology Co. A Bloomberg report citing people familiar with the matter claims that this comes after European automakers warned that maintaining the restrictions on the Chinese chip company could trigger significant disruptions across supply chains.



The proposal, expected from the European Commission as early as this week, would need approval from all 27 EU member states before taking effect, the report noted. The exemption would reportedly be temporary, likely lasting several months, to give European industries more time to diversify their suppliers and reduce their dependence on the Chinese company.



The move follows concerns raised by European automakers, which argued that they had not been given sufficient time to adapt to the sanctions and warned that existing component stocks could run out within weeks. Industry representatives reportedly said the restrictions imposed two months ago could disrupt manufacturing across the automotive sector.

Why did the EU sanction the Chinese semiconductor company in the first place

Yangzhou Yangjie Electronic Technology Co. was included in the EU’s 20th sanctions package in April. The bloc alleged that the company supplied dual-use goods or technologies that reached Russia and that some of its products had been found in drones and glide bombs used in the war against Ukraine.



The sanctions targeted entities based in China that the EU says contributed to Russia’s military capabilities. The potential exemption reflects the tension between sanctions enforcement and the stability of the industrial supply chain, particularly for sectors dependent on semiconductors.

Europe’s auto industry has already faced chip supply strains

The concerns come after the European automotive industry experienced semiconductor shortages late last year linked to disruptions involving Chinese-owned chipmaker Nexperia. The Dutch government took control of operations in the Netherlands using a Cold War-era law intended to safeguard national security.



China responded by blocking exports from Nexperia’s China unit, leading to shortages of legacy semiconductors used in power management systems and affecting production at several automotive manufacturers.



At the same time, increasing demand for memory chips driven by artificial intelligence applications has tightened semiconductor supply and pushed prices higher globally.