Once again, the Dutch chip industry is at the center of the geopolitical battle over technology. This time it is not about ASML machines costing millions, but about the cheap, simple transistors that chip manufacturer Nexperia produces.
The Dutch cabinet intervenes in an unusually harsh manner at Nexperia. With the help of an obscure law and a closed ruling by the Enterprise Chamber, Chinese CEO Zhang Xuezheng (‘Wing’) is pushed aside. Wing is the man behind Wingtech, the Chinese holding company that bought Nexperia in 2019.
After reporting from NRC the Ministry of Economic Affairs published a press release on Sunday evening. Due to the “significant scale and urgency of administrative shortcomings” at Nexperia, the ministry has decided to implement the Availability of Goods Act. It is the first time that this law, intended for wars and other disasters, has been used. The company continues to produce chips, but the government now has the option to reverse decisions within the company. Such a procedure has never occurred in the Netherlands. In fact, the company is under receivership for a year.
Nexperia board members went to the Amsterdam Enterprise Chamber last week, which suspended Wing. Wing is furious, he states that the conflict is about to happen geopolitical biasesChinese media reported. Wingtech’s share price plummeted by 10 percent on Monday morning. The Shanghai Stock Exchange immediately halted trading in the stock. What’s going on?
1What makes Nexperia?
Nexperia’s head office is located in Nijmegen. The company makes relatively simple switches (diodes) and chips that are found in almost all electronics. These are cheap parts of only a few millimeters in diameter. Because Nexperia manufactures them in large quantities (more than 100 billion pieces per year), this still generates a turnover of 2 billion euros per year.
With 12,500 employees and factories in Hamburg, Manchester, China, Malaysia and the Philippines, Nexperia is one world player with Dutch roots. It is a former division of chip manufacturer NXP, once a subsidiary of electronics giant Philips. That legacy is visible: decades-old Philips machines are still churning out decades-old Philips machines in the Chinese Nexperia factory in Dongguan.
2How did Nexperia end up in Chinese hands?
NXP sold its ‘Standard Products’ division to a Chinese investor group for $2.75 billion in 2017. He spun off the company, but kept the head office in Nijmegen. Wingtech acquired Nexperia in 2019. Both deals were given the green light by American and Chinese regulators at the time.
Initially, it seemed that Nexperia would not be affected by the emerging tech war between the US and China. After all, the discussion about export restrictions was only about high-quality chips and advanced chip equipment, such as ASML makes.
But simple semiconductors can also be crucial. This became clear during the corona pandemic. Car manufacturers had to shut down production lines because of a lack of relatively simple chips.
After the pandemic, geopolitical tensions between the US and China continued to rise. Wing saw its opportunities for expansion in Europe diminish in the US, because Nexperia was seen as a Chinese company. This was the case, for example, when it had to divest a recently purchased factory in the United Kingdom (Newport) in 2022. The British government regarded the takeover as a threat to national security and retroactively rejected it under a new law.
Since 2023, Economic Affairs has been able to use a law that tests takeovers on the basis of safety (Vifo). But this only applies retroactively until 2020. In order to enforce changes at Nexperia, Economic Affairs had to use a different means.
3What did Wing do wrong?
Chip manufacturer Nexperia itself raised the alarm about Wing’s mismanagement, but the company does not want to say what exactly he did wrong. According to insiders NRC spoke to, one of the risks is the appointment of Chinese people to strategic places. In emergency situations – hence the use of this emergency law – Europe would have less control over its own chip production. Another option: Wing also has other Chinese companies under its wing in addition to Wingtech. There could be a conflict of interest and in this way ‘crucial knowledge’ could possibly leak out, as Economic Affairs describes it.
4Does this have to do with export restrictions?
Wing (50) sold some parts of Wingtech earlier this year, after the US government placed its holding company on the Entity List of the Bureau of Industry and Security. That is a rapidly expanding list of mainly Chinese companies that are not allowed to buy American technology without a license. Since October 1, Wingtech subsidiary Nexperia has also been subject to stricter export restrictions.
The concerns about Wing’s role do not appear to be directly related to the tightened US measures, or to the strict export restrictions on rare metals that China announced last week. These potentially have an impact on the production of Dutch chip machines and are at the same time part of the diplomatic game about possible further restrictions on ASML.
However, the law is not aimed at other countries, EZ emphasizes in the explanation. But these events follow each other very quickly. In any case, with this far-reaching intervention at Nexperia, the Dutch government shows that it has shaken off its naivety about the strategic importance of its own chip industry, and that of Europe.
5What is the ‘Availability of Goods Act’?
It is the first time that a minister has used the Availability of Goods Act, a spokesperson for the Ministry of Economic Affairs confirms. And that while the law has been around since 1952. “It is a real Cold War law, which arose in the context of reconstruction and strategic supplies after the Second World War,” says professor of economic administrative law Pim Jansen of Erasmus University Rotterdam. “The fact that the law has now been implemented is truly historic.”
The law is intended to enable the Dutch government to guarantee the availability of essential goods, Jansen says. All ministers are authorized to issue a ‘general or special order’ for this purpose, in preparation for emergency situations. With the law in hand, the government can intervene strongly in business operations. Jansen: “For example, the government can oblige producers not to make any changes to crucial production resources without a permit. Or prescribe that certain changes in business operations may only take place with permission.”
According to Jansen, the question is whether there is an emergency situation or comparable circumstances in the case of Nexperia. “Does poor governance or the risk of strategic dependence fall under extraordinary circumstances? Is it a matter of national and European economic security or does it run counter to economic protectionism? In the latter case, this intervention is really not allowed.” Due to the limited information the minister has provided so far, these questions are still difficult to answer.
In the press release, the ministry writes that parties can appeal the decision to the court.
6What happened at the Enterprise Chamber?
On Wednesday, October 1, the Dutch parent company of Nexperia and a number of directors requested an emergency hearing at the Enterprise Chamber, a department of the Amsterdam Court of Appeal, specialized in conflicts within an organization. Request: suspend Chinese director Zhang Xuezheng and remove control of Nexperia’s shares from the Chinese shareholder and transfer it to an independent party. According to the Chinese owner of Nexperia, the judges complied with that request on the same day, without holding a hearing. This emergency measure was discussed at a closed session on Monday, October 6, the Chinese parent company Wingtech said in an official statement. On October 7, the Enterprise Chamber would have ruled and upheld the emergency measures.
The Amsterdam Court of Appeal is unprecedentedly closed on this case. A spokesperson refuses to say anything about Nexperia. The court will not even confirm whether there was a hearing of the Enterprise Chamber last week, behind closed doors or otherwise, or whether a ruling has been made. The court spokesperson could not say on Monday under what legislation or regulations absolute secrecy is maintained around the chip manufacturer.
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