Netherland seizes control of Chinese-owned chipmaker, citing economic security

The Dutch government has made a highly exceptional move by taking temporary control of Nexperia, a major semiconductor company owned by China’s Wingtech Technology based in the Netherlands.

The announcement was made on Sunday, October 12, and is followed by concerns over the potential loss of crucial chip technology from Europe.

This sudden takeover is supported by the “Goods Availability Act,” a law invoked by the Dutch Ministry of Economic Affairs to justify takeover.

According to the 1952 Dutch framework, the act grants the government powers to secure the availability of essential goods during a national emergency.

Why did the Netherlands seize a Chinese-owned chipmaker?

As observed by the ministry, there were “serious governance shortcomings and actions” in Nexperia that posed a serious threat to the continuity of "crucial technological knowledge and capabilities” on Dutch and European soil.

The government assesses that European economic security is at higher risk due to uncertainty of losing these capabilities specially for chips necessary for automotive and consumer electronics industries.

In order to take the situation under the radar, the Dutch government suspended Wingtech’s control over Nexperia.

The company reported that the chairman, Zhang Xuezheng, has been immediately removed from Nexperia’s board.

A third party manager will be hired to manage the company over a maximum of one year; he is entitled to veto decisions that he perceives to be detrimental. The operations of Nexperia will not stop, but significant alterations in assets or staff are put on hold.

The ruling was a shock to the financial markets and the stock of Wingtech dropped 10% at the Shanghai Stock Exchange. As a reaction, Wingtech complained about the action as an overreach due to geopolitical bias and that it is pursuing legal redress.

The move is a major intensification of the trade war in semiconductors around the world. It is based on the U.S. move to add Wingtech to its export ban list, the Entity List, last year and days after China imposed its own export ban on rare earth materials further damaging tech trade between the West and China.