Dutch government takes control of Chinese-owned chipmaker Nexperia

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The Dutch government has taken control of Chinese-owned semiconductor maker Nexperia, warning of risks to Europe’s economic security after alleging “serious management deficiencies” at the company.

The Dutch Ministry of Economic Affairs said in a statement on Sunday that it had taken this action due to “a threat to the continuity and protection of important technological knowledge and capabilities on Dutch and European territory.”

The move escalates frictions between Western countries and China over access to cutting-edge technology such as advanced semiconductors and vital raw materials. On Thursday, China imposed sweeping restrictions on exports of rare earth elements used in products from cars to wind turbines.

The Dutch ministry said it invoked the country’s Availability of Goods Act due to “recent and severe shortcomings and serious administrative actions” at Nexperia, which is based in the Netherlands and has been majority owned by Chinese technology group Wingtech since 2019.

“The decision aims to prevent a situation in which goods produced by Nexperia (finished and semi-finished products) become unavailable in emergency situations,” the statement added.

Nexperia produces chips used in the European automobile industry and in consumer electronics.

Vincent Karremans, the Dutch Minister of Economy, can now block or cancel decisions taken by Nexperia’s board of directors. His administration took action on September 30 but did not announce its action until October 12.

A Chinese state-backed investment consortium acquired Nexperia for $2.75 billion in 2017 after it was spun off from NXP Semiconductor, a Dutch chipmaker. The following year, the consortium began selling its shares to Wingtech.

Wingtech, which started out as a contract manufacturer of smartphones, said in a statement that the decision “constitutes an act of excessive intervention driven by geopolitical bias, not a fact-based risk assessment.”

“This move seriously contradicts the EU’s long-standing advocacy of market economy principles, fair competition, and international trade standards,” she added.

China’s Foreign Ministry said on Monday that it opposes the misuse of national security concepts and the use of discriminatory measures against Chinese companies.

Spokesman Lin Jian said the Netherlands should “genuinely adhere to market principles and refrain from politicizing economic and trade issues.”

The company said in stock exchange filings that it had appealed to the Chinese government for assistance and provided details of the change in control of Nexperia. Wingtech shares in Shanghai fell a maximum of 10 percent on Monday.

On September 30, the Dutch government issued an order requiring Nexperia, its subsidiaries, affiliates and global offices not to make any modifications to its assets, intellectual property, business operations or employees for one year, Wingtech said.

The next day, three senior Nexperia executives of Dutch and German nationality filed an emergency request with the Amsterdam Court of Appeal to intervene in the chipmaker’s case. The court immediately suspended the powers of Chinese Chief Executive Zhang Xueqing.

The court also suspended Zhang from his position as CEO of Nexperia and a non-executive director of its holding company, Wingtech said.

A week later, on October 7, the court ordered the appointment of an independent, non-Chinese director, who would have decisive voting power and represent Nexperia.

The court also ordered that all shares in Nexperia – except one – be placed under receivership by a designated individual, which has not yet been named, for administration purposes, Wingtech said. The company added that it retained the economic rights to all its shares.

Washington last year added Wingtech to its “Entity List,” accusing the company of helping China acquire sensitive semiconductor manufacturing technology. The designation requires US companies to seek a license to sell to it. These license applications are often denied.

The US Commerce Department last month introduced new rules expanding sales restrictions to include affiliates of companies on the Entity List, meaning Nexperia will be subject to the restrictions due to its ownership of Wingtech.

The Chinese Ministry of Commerce on Sunday listed the US action as one of the reasons for imposing broader restrictions on rare earths.

Nexperia is based in Nijmegen but has branches all over the world. The company said it “complies with all current laws, regulations, export controls and sanctions regimes.”

In November 2022, Nexperia was blocked from purchasing Newport Wafer Fab in the UK due to national security concerns related to the Dutch-owned company Wingtech.

Under US pressure, The Hague has already restricted Dutch group ASML’s sale of advanced semiconductor manufacturing machines to China.

The ministry said its latest action was not “directed at other companies, the sector or other countries” and that “parties may file an objection to this decision before the courts.”