The Dutch government believed chipmaker Nexperia's Chinese owners planned to move its manufacturing operations to China, prompting the unprecedented seizure of the company that has sent shock waves through the global tech world.

Earlier this month, authorities seized control of Nexperia's management and ousted its Chinese CEO, Zhang Xuezheng, citing national security concerns.

In response, China's Ministry of Commerce on October 4 imposed export controls on Nexperia's Chinese subsidiary and its subcontractors, banning the export of domestically made components.

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Frans Scheper, CEO of Nexperia until 2020, told Dutch media on Thursday that Wingtech, the parent company, has built a new factory in China, "which can take over production from Nexperia's European factories".

Scheper told Dutch broadcaster RTL that the Ministry of Economic Affairs "feared that Nexperia would move chip production from Europe to China; this would mean the loss of one of Europe's largest chip manufacturers".

The Post can confirm that this fear was the primary motivator behind The Hague's dramatic intervention, which has infuriated Beijing and will almost certainly incur further retaliation.

An employee works with a wafer on the production line of Dutch semiconductor company Nexperia in Hamburg, Germany, in June. Photo: Reuters alt=An employee works with a wafer on the production line of Dutch semiconductor company Nexperia in Hamburg, Germany, in June. Photo: Reuters>

"The shortcomings relate, among other things, to the improper transfer of production capacity, financial resources, and intellectual property rights to a foreign entity owned by the CEO and not connected to Nexperia," Dutch minister for economic affairs Vincent Karremans wrote in a letter to parliament this week.

"This posed risks of knowledge leakage and thus the loss of future production capacity, which is crucial for, among others, the European automotive, consumer electronics, and defence industries," he wrote.

"The shortcomings have also, though to a lesser extent, affected ongoing discussions between my ministry and Nexperia."

The government insists that the decision was not made under duress from any other country, despite the fact that court documents showed clearly that the United States was leaning on The Hague to get rid of the Chinese leadership if Nexperia was to stay off its Entity List.

Last December, parent company Wingtech was added to the list, which forbids US companies from transacting with named entities.

On October 1, the rules were changed, meaning overseas subsidiaries in which the listed entity owns a 50 per cent stake or more would also be blacklisted. Zhang, the CEO, had not played ball with Dutch efforts to ring-fence the European company from its Chinese parent, the court documents showed.

"It is almost certain that the CEO will have to be replaced to qualify for the exemption from the entity list," read the minutes of a meeting between Dutch and US officials in June 2025, according to court documents opened on Tuesday.

Regardless of whether the decision was influenced by Washington, as this week has gone on, it has revealed the awful set of choices that were on the table.

Had there been no intervention, Nexperia would have been banned from doing business with US customers and suppliers - but also potentially had its manufacturing relocated to China.

This would have cost thousands of Dutch jobs and upended Europe's automotive supply chain, which is reliant on the billions of specialist semiconductors Nexperia makes.

On the other hand, the government move has left Nexperia cut off from its Dongguan plant in China's southern Guangdong province, following Beijing's retaliatory export controls.

The company makes more than 100 billion chips per year, but according to Wingtech Chairman Yang Mu, 70 per cent of those come from the Dongguan plant. It is not clear whether the company will be able to overcome Beijing's controls given the complexity of its value chain.

Nexperia designs its chips in Nijmegen, its Dutch headquarters, and makes wafers in Manchester and Hamburg.

These are sent mainly to Dongguan, where about 70 per cent of final products are assembled and tested before being sold in China. The rest is finished in Nexperia's Philippines and Malaysia plants for export, leaving the company legally Dutch but operationally centred in China.

Dutch Prime Minister Dick Schoof told parliament on Thursday that the government was in dialogue with China "to reach a constructive solution" regarding Nexperia.

The saga will provide a "warning for other attempts to foster cooperation between Europe and China in sensitive areas", said Sense Hofstede, an independent Dutch China analyst and the author of the newsletter De Chinese Wouden.

"If the EU chooses to de-risk rather than decouple in sensitive areas, that does require the Chinese party to at least accept that the European party perceives a risk and that measures are taken to mitigate it," he said.

"If a Chinese partner refuses to cooperate on de-risking, you get the decoupling that is now under way with Nexperia."

For Hofstede, the episode highlights Europe's shortcomings in shielding its tech sector from outside interference, more than seven years after ASML, another Dutch company, was first pressured to stop selling its high-end lithography machines to China under US export controls.

Nexperia designs its chips in Nijmegen, its Dutch headquarters, and makes wafers in Manchester and Hamburg. Photo: Reuters alt=Nexperia designs its chips in Nijmegen, its Dutch headquarters, and makes wafers in Manchester and Hamburg. Photo: Reuters>

"No progress has been made at developing a European approach, even though Nexperia too affects EU-wide supply chains both upstream and downstream. The Netherlands was again being forced to act by itself as Europe continues to be pushed and pulled by US and Chinese forces," he said.

The Nexperia saga comes at an awful time for European industry, which is already staring down the barrel of tightened Chinese export controls on rare earth elements and magnets, vital ingredients in hi-tech manufacturing.

Car companies including Volkswagen and downstream suppliers like Bosch are holding "urgent meetings" as they seek to navigate the double whammy, Bloomberg reported on Thursday.

A third challenge, meanwhile, comes in the form of rising auto car shipments to Europe, further imperilling local producers.

"That Nexperia produces chips for the automotive sector is particularly salient: European politicians fear that China's surging car exports - fuelled by growing technological sophistication and heavy subsidies - are squeezing Europe's key industry," said Sander Tordoir, chief economist at the Centre for European Reform, a think tank.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.