Western executives at Nexperia said he had insisted the company order $US200 million ($308 million) of silicon wafers from a company in China that he controls, even though the company only needed about $US70 million of them. That could be a mechanism for stripping cash from the Dutch entity, effectively gutting it.
Not surprisingly, China hasn’t responded well to the Dutch actions, even though Wingtech retains the economic benefits of its ownership of a company now governed by the Dutch.
Donald Trump’s trade war with China is having far-reaching consequences.Credit: AP
While Nexperia manufactures its chips in the Netherlands, about 80 per cent of them are sent to China for testing and packaging. China has ordered Wingtech to suspend its exports and protect its assets, including those Nexperia chips being processed in China.
After Zhang established a silicon wafer factory in Shanghai in 2020, Nexperia, which previously sourced components from European and Taiwanese companies, has also become increasingly dependent on that factory.
While Nexperia is a minnow in the vast auto components sector, it has a market share of about 40 per cent in transistors and diodes and in the complex and sensitive industry supply chains, disruption to even the most basic components threatens production. The output of companies like BMW, Mercedes-Benz, Stellantis, Toyota and Volkswagen are all under threat.
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Chinese and Dutch officials have held discussions over the seizure, but the Dutch, and the EU more broadly, are caught in the crossfire of US and Chinese trade restrictions.
Their conflict could escalate further, with the US now threatening to cut off China’s access to all critical software, including programs used to design circuits for chips. That would threaten China’s smartphone, vehicle and artificial intelligence sectors, among others.
That is a response to China’s implicit threat to deny America access to rare earths and rare earths magnets, China’s most potent trade weapon. Software, where US and European companies (but US companies in particular) dominate, is China’s Achilles heel.
If the imminent meeting between Donald Trump and Xi Jinping goes ahead, rare earths will be at the top of the list of American demands, while the blacklist and semiconductors will be China’s priority.
The dramatic Dutch action isn’t the first time a Western government has moved against Chinese ownership of a sensitive technology business and probably won’t be the last.
Last year, the British government forced Nexperia to sell Britain’s largest semiconductor manufacturing facility to a US company because of national security concerns. Nexperia had acquired Newport Wafer Fab in 2021.
The head office of Chinese-owned chipmaker Nexperia in Nijmegen, Netherlands.Credit: AP
The Dutch have their own experience of this. Again under pressure from the US, several years ago they cut off China’s access to the most advanced photolithography machines, produced by the Dutch company ASML and used by other companies to mass-produce microchips.
ASML is the world’s only producer of the extreme ultraviolet (EUV) lithography machines used in making the most advanced chips.
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In Australia, of course, the Albanese government is considering how to regain control of the Port of Darwin, owned by China’s Landbridge. It is also going to have to confront the extent to which, having just signed a deal that envisages significant joint investment with the US in rare earths, it allows Chinese investment in the sector.
The Nexperia saga exposes the way the trade confrontation between Washington and Beijing is spilling over into other economies and forcing governments and companies to make impossible decisions, caught between the competing demands of the two superpowers.
It also highlights the vulnerabilities caused by the sudden about-face from a world that was, before the pandemic and Trump’s second coming, built on increasingly globalised and complex supply chains.
The pandemic caused companies and government to focus on the security of supply of critical products. Trump’s trade war on the rest of the world has provided a different incentive, and even greater urgency, to rethinking those very exposed supply chains – or finding a way to end the trade conflict.
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