Netherlands hands back control of Chinese-owned chipmaker Nexperia

[AMSTERDAM] The Dutch government suspended its powers over chipmaker Nexperia, handing back control to its Chinese owner and defusing a standoff with Beijing that had begun to hamper automotive production around the world.

The order that gave the Netherlands powers to block or revise decisions at Nijmegen-based Nexperia was dropped as “a show of goodwill”, Economic Affairs Minister Vincent Karremans said on Wednesday (Nov 19), adding that discussions with Chinese authorities are continuing.

“The Nexperia group currently shows no signs of continuing the behaviour that prompted my order, nor any intention to do so,” the minister said in a letter to parliament on Wednesday.

The Dutch state invoked supervisory powers over Nexperia to safeguard crucial technology, citing concerns that actions by Wingtech Technology, the chipmaker’s Chinese owner, risked hobbling the company.

Nexperia is the last manufacturer with production capacity in Europe for so-called “legacy” chips, which are crucial in the automotive and consumer electronics sectors.

A Wingtech spokesperson rejected the “accusations” by the Dutch government about acts of alleged mismanagement and said that “no proof” had been provided. Nexperia did not immediately respond to an emailed request for comment.

Bloomberg had reported earlier this month that the Netherlands was prepared to take the step if chip exports from the company’s site in China could be confirmed. Karremans said that there is now “cautious optimism” that supplies of Nexperia chips are flowing again.

Despite the suspension, Nexperia still has the obligation to provide information to the government about transfers of production resources or intellectual property, the economic affairs ministry noted.

The move marks a significant de-escalation of a dispute that underscored the global nature of supply chains and highlighted Beijing’s growing leverage over the global economy. The spat had threatened to disrupt automakers from Honda Motor to Volkswagen.

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Karremans sparked the dispute in late September by invoking a Cold War-era law to gain powers over decisions at Nexperia for a year. The Chinese government retaliated by imposing export restrictions over components from the Dutch company’s facility in Guangdong, which assembles chips from wafers made in Europe and accounted for about half of its pre-crisis volumes.

The reversal by the Dutch government was set in motion after a breakthrough in talks earlier this month that involved Chinese and Dutch officials, with input from Germany, the European Union as well as the US. To help resolve the stalemate, Beijing agreed to loosen export restrictions from Nexperia’s Chinese plant, the largest of its kind in the world.

The Dutch economic affairs ministry sent a delegation to Beijing this week to negotiate a “mutually agreeable solution,” according to a ministry statement.

While the immediate supply squeeze is set to relax, longer term issues remain.

After auto companies were forced to scramble for alternatives, Nexperia’s future role in the sector could be in doubt. Also, concerns about China’s ownership of the company goes back longer, with managers at the chipmaker approaching the Dutch government already in late 2023.

The role of Wingtech’s founder Zhang Xuezheng is also uncertain. He was suspended as Nexperia’s chief executive officer by an Amsterdam court on Oct seven following a petition by the chipmaker’s management. His reinstatement was a demand by Wingtech to resolve the dispute, which also triggered a feud between Nexperia’s headquarters and its Chinese operations over financing and control.

The Netherlands felt comfortable handing back control because the court ruling suspending Zhang still stands, said a source.

Wingtech said that the Dutch government should withdraw its support in the court case against Zhang if it has “the sincerity to solve the problem”, a spokesperson for Wingtech said. “These proceedings form a threat to the continuity of Nexperia BV and therefore for the economic security of the Netherlands and Europe.”

While the ministry’s order served its purpose, it could come back into effect if supplies are once against at risk, the person added.

Karremans noted that the suspension was justified against the backdrop of the measures taken by the Amsterdam court and based on “the confidence that China will continue on its current course”.