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. In a statement on Sunday the Dutch Ministry of Economic Affairs said it acted because of “a threat to the continuity and safeguarding on Dutch and European soil of crucial technological knowledge and capabilities”. The move escalates frictions between western countries and China over access to high-end technology such as advanced semiconductors and critical raw materials. 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.

“The decision aims to prevent a situation in which the goods produced by Nexperia (finished and semi-finished products) would become unavailable in an emergency,” its statement added. Nexperia produces chips used in the European automotive industry and in consumer electronics. Vincent Karremans, the Dutch economy minister, can now block or reverse decisions taken by Nexperia’s board. His department acted on September 30 but only made its move public on October 12.

A state-backed Chinese investment consortium acquired Nexperia for $2.75bn in 2017 after it was carved out of NXP Semiconductors, a Dutch chip manufacturer. The following year, the consortium began selling its shares to Wingtech. Wingtech, which started as a contract manufacturer for smartphones, said in a statement that the decision “constitutes an act of excessive interference driven by geopolitical bias, not by fact-based risk assessment”. It added: “This move gravely contravenes the European Union’s long-standing advocacy for market-economy principles, fair competition, and international trade norms.” China’s foreign ministry on Monday said it opposed the misuse of national security concepts and the use of discriminatory measures against Chinese companies.

The Netherlands should “truly adhere to market principles and refrain from politicising economic and trade issues”, said spokesperson Lin Jian. The company said in stock exchange filings that it had appealed to the Chinese government for assistance and detailed the change in control at Nexperia. Wingtech’s shares in Shanghai fell by the maximum 10 per cent on Monday. Wingtech said that on September 30 the Dutch government had issued an order requiring Nexperia and its global subsidiaries, branches, and offices not to make any adjustments to their assets, intellectual property, business operations or personnel for one year. The following day, three top Nexperia executives with Dutch and German nationalities submitted an emergency request to the Amsterdam court of appeal to intervene at the chipmaker. The court immediately suspended the powers of Chinese chief executive Zhang Xuezheng. The court also suspended Zhang from his positions as executive director of Nexperia and 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 hold decisive voting power and represent Nexperia. 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. The company added that it retained the economic rights to all of 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 licence to sell to them. Those licence 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. The Chinese commerce ministry on Sunday listed the US action as one of the reasons it had imposed the broader rare earth restrictions. Nexperia is based in Nijmegen but has subsidiaries across the world. The company said it “complies with all existing laws and regulations, export controls and sanctions regimes”. In November 2022, Nexperia was blocked from buying Newport Wafer Fab in the UK over national security concerns related to the Dutch company being owned by Wingtech.

Under US pressure, The Hague has already restricted the sale by Dutch group ASML 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 lodge an objection to this decision before the courts”.