As Trump cranks up (and then walks back) rhetoric towards China, the Dutch government just turned up the Beijing-baiting amplifier to '11'.
In a sudden and quite chocking move, The FT reports that the Dutch government has taken control of Chinese-owned semiconductor maker Nexperia, warning of risks to Europe’s economic security after alleging “serious governance shortcomings” at the company.
Nexperia, the European semiconductor unit of China’s Wingtech Technology Co. is a key supplier to the automotive and consumer electronics industries. The Sept. 30 court order invoked the Goods Availability Act for the first time, a piece of legislation enacted more than 70 years ago to ensure access to critical products in emergencies.
“The decision aims to prevent a situation in which the goods produced by Nexperia would become unavailable in an emergency,” the government said in a statement late on Sunday, against a backdrop of escalating trade tensions between China and the US and its allies.
The move escalates frictions between western countries and China over access to high-end technology such as advanced semiconductors and critical raw materials.
The Netherlands should “truly adhere to market principles and refrain from politicising economic and trade issues”, said spokesperson Lin Jian.
On Thursday, China placed sweeping restrictions on the exports of rare earths used in products from cars to wind turbines.
The Dutch ministry said it invoked the country’s Goods Availability Act because of “recent and acute serious governance shortcomings and actions” at Nexperia, which is based in the Netherlands and has been majority-owned by Chinese technology group Wingtech since 2019.
As one would imagine, this move was not received well by Wingtech, which called the Dutch move excessive and based on geopolitical bias.
“We strongly protest against the discriminatory treatment targeting Chinese firms,” the company said in a statement on Monday posted on Chinese social media platform WeChat, urging the Dutch government to revoke the directives.
We have initiated all legal and diplomatic channels, it said.
As Bloomberg reports, the move was actually instigated as a management coup:
Nexperia’s own executives called for a probe into the company, headquartered in Nijmegen, the Netherlands. Its Dutch chief legal officer, supported by German chief operating officer and chief financial officer filed a petition to an Amsterdam court on Oct. 1 seeking an investigation into the firm, Wingtech said.
The demands of the European executives closely aligned with directives from the Dutch government, Wingtech said, framing the move as an effort to use political pressure to deprive shareholders of their rights and overturn the company’s legitimate governance structure.
The Dutch government said Nexperia showed “recent and acute signals of serious governance shortcomings,” without elaborating. “These signals posed a threat to the continuity and safeguarding on Dutch and European soil of crucial technological knowledge and capabilities,” it said in the statement.
While Nexperia can continue regular production, the government can now block or reverse its decisions. The Hague is demanding that Wingtech suspend changes to Nexperia’s assets, business or personnel for as much as a year, a requirement that extends to its subsidiaries, the Chinese firm said in an exchange filing on Sunday.
Its shares plunged by its daily limit of 10% in Shanghai on Monday.
The court also ordered that all shares in Nexperia - except one - should be placed under custodial management by a designated individual, not yet named, for management purposes, Wingtech said.
“China always opposes overstretching the concept of national security and discriminatory moves that target companies from certain countries,” China Foreign Ministry spokesman Lin Jian said at a regular press briefing in Beijing on Monday.
“China is firmly resolved in defending its own legitimate and lawful rights and interests.”
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 them. Those license requests are often denied.
The US commerce department last month introduced new rules that extend the sales restrictions to subsidiaries of companies on the entity list, meaning that Nexperia would be subject to restrictions because of its Wingtech ownership.
We can only imagine the reaction in Washington or Brussels were this kind of action undertaken by Beijing on a US tech firm within China.