The Dutch government has taken control of Nexperia, a Chinese-owned semiconductor maker based in the Netherlands, in an extraordinary move to ensure a sufficient supply of its chips remains available in Europe amid rising global trade tensions.

Nexperia, a subsidiary of China’s Wingtech Technology, specializes in the high-volume production of chips used in automotive, consumer electronics and other industries, making it vital for maintaining Europe’s technological supply chains. 

On Sunday evening, the Dutch Minister of Economic Affairs revealed that it had invoked the “Goods Availability Act” on the company in September in order “to prevent a situation in which the goods produced by Nexperia (finished and semi-finished products) would become unavailable in an emergency.”

Following the announcement from the Hague, Wingtech plunged its maximum daily limit of 10% on the Shanghai Stock Exchange.

The Goods Availability Act allows the Hague to intervene in private companies to ensure the availability of critical goods in preparation for emergency situations, and its use comes amid escalations in the U.S.-China trade war.

The government statement said the “highly exceptional” move had been made after the ministry had observed “recent and acute signals of serious governance shortcomings and actions” within Nexperia.

“These signals posed a threat to the continuity and safeguarding on Dutch and European soil of crucial technological knowledge and capabilities. Losing these capabilities could pose a risk to Dutch and European economic security,” it said, identifying automotives as particularly vulnerable.

Governance changes

In a corporate filing dated Oct.13, lodged with the Shanghai Stock Exchange, Wingtech confirmed Nexperia was under temporary external management and had been asked to suspend changes to the company’s assets, business or personnel for up to a year, according to a Google translation.

Wingtech chairman Zhang Xuezheng had been immediately suspended from his roles as executive director of Nexperia Holdings and non-executive director of Nexperia after the ministerial order, according to the filing.

The filing added that Nexperia’s daily operations will continue, with the impact of the measures not yet quantifiable.

“The Dutch government’s decision to freeze Nexperia’s global operations under the pretext of ‘national security’ constitutes excessive intervention driven by geopolitical bias, rather than a fact-based risk assessment,” Wingtech said in a deleted WeChat post, which was archived and translated by Chinese policy blog Pekingnology.

It added that since it acquired Nexperia in 2019, Wingtech “has strictly abided by the laws and regulations of all jurisdictions where it operates, maintaining transparent operations and sound governance,” and employs “thousands of local staff” through R&D and manufacturing sites in the Netherlands, Germany and Britain.

A spokesperson from Nexperia told CNBC that the company had no further comments, but that it “complies with all existing laws and regulations, export controls and sanctions regimes,” and remained in regular contact with relevant authorities.

The Netherlands’ move comes after Beijing tightened its restrictions on the export of rare earth elements and magnets Thursday, which could impact Europe’s automotive industry. 

The move could also further strain trade relations between China and the Netherlands, following years of restrictions on Dutch company ASML’s exports of advanced semiconductor manufacturing equipment to China.

In 2023, the Netherlands had also investigated Nexperia’s proposed acquisition of chip firm startup Nowi, though the deal was later approved.