“Feints within feints within feints.” ― Frank Herbert, Dune
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President Trump tried to bring trade tensions with China down to a simmer last weekend, but in Europe, the Netherlands gave the Middle Kingdom reason to stay wary of the West. The Dutch Ministry of Affairs on Sunday night announced that it had taken what it acknowledged as a “highly exceptional” move to take control of Nexperia, a Dutch semiconductor company owned by China’s Wingtech, a partially state-owned manufacturer of semiconductors and consumer electronics. (Among Wingtech’s products are – according to smartphone experts – the T1 smartphone offered by Trump Mobile.)
The announcement concerned a Sept. 30 decision by Dutch regulators to remove Nexperia’s Chinese CEO Zhang Xuezheng from power and place all shares of Nexperia under custodial management – falling short of an outright nationalization, but not by much. Officials claimed jurisdiction through the country’s Goods Availability Act, which authorizes the government to ensure the availability of critical goods during emergencies or threats to national security. (The ministry also cited unspecific “serious governance shortcomings” at the company, brought to its attention by European Nexperia executives.)
The Financial Times reported this morning that the true motivator behind the move was the U.S., which indicated to Dutch authorities that Nexperia would remain on the entity list as long as a Chinese national remained the company’s head. That would have placed severe limits on the company’s access to U.S.-originated technology, largely destroying its viability as a business.
Nexperia’s chips are important, used in a range of automobiles, consumer electronics, and industrial robots. Yet they are hardly irreplaceable. Though doing so would require time-consuming testing, Nexperia’s chips could theoretically be replaced by alternatives from companies such as Onsemi, Infineon, Analog Devices, Texas Instruments, and former Nexperia parent NXP Semiconductors. None of these companies make the kinds of headline-grabbing, advanced-node chips that go into AI hyperscalers or flagship smartphones.
It’s reasonable to speculate about whether Dutch authorities really had the interests of a different company in mind when they made this move. Relative to the economy of the Netherlands, Nexperia is not terribly important. The crown jewel of Europe’s tech sector is arguably ASML, the most valuable company in the Netherlands as well as the world’s only manufacturer of bleeding-edge advanced chip lithography equipment. ASML machines are currently the only ones that Taiwan Semiconductor Manufacturing Corp. (TSMC) can use to make advanced AI chips for the likes of Nvidia and AMD.
China wants ASML machines, but the U.S. has “foreign direct product rules” that prohibit even foreign companies from selling goods with critical U.S. technologies to China. (The Dutch government, on request by the U.S., has also prohibited such sales.) Yet the pressure on ASML isn’t just from the U.S. ASML technology relies on rare-earth materials: magnets made of neodymium, dysprosium, and terbium are used for high-precision motors, while yttria and cerium are essential to the lasers used to etch silicon wafers, for example. Recall that last week, China suggested it might implement its own version of foreign direct product rules, imposing export restrictions on any product (whether made by a Chinese company or not) that uses China-originated rare earths. This rule, not entirely unexpected given the longstanding U.S. precedent, could be used to bar ASML from selling its products to TSMC or any U.S. chip manufacturer that China decides to exclude.
Seen in this light, the Dutch move toward Nexperia could have been intended as a shot across the bow as it moves to safeguard ASML’s rare-earth supply chain and revenues. Nexperia is just important enough for its takeover to get Beijing’s attention, as the company’s manufacturing efficiency and quality in mature-technology chips would help China expand its existing dominance in this area.
However, just as the Dutch likely care far more about ASML, Chinese authorities similarly have other interests in the Netherlands that are strategically more important. For example, the China Ocean Shipping (Group ) Company (COSCO) maintains extensive facilities and operations at (or around) the Port of Rotterdam, using it as its main launching point for Chinese exports and European imports. Similarly China National Cereals, Oils and Foodstuffs Corporation (COFCO) views the Netherlands as the center of its European agricultural commodities trading, with extensive warehousing and logistics supporting COFCOs shipments between Latin America, China, and other parts of Europe.
Wingtech, Nexperia’s corporate parent, said the Dutch government’s actions were “an act of excessive interference driven by geopolitical bias, not by fact-based risk assessment.” Wingtech shares fell 10% in Shanghai Stock Exchange trading on Monday before trading was halted.
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 10/14 | 6:00 AM | Sep Small Biz Optimisum | 100.6 | 100.8 |
| 10/16 | 8:30 AM | Sep PPI m/m | 0.3 | -0.1 |
| 10/16 | 8:30 AM | Sep Core PPI m/m | 0.2 | -0.1 |
| 10/16 | 10:00 AM | Oct Homebuilder Sentiment | 33 | 32 |
| 10/17 | 8:30 AM | Sep Import Price m/m | 0.1 | 0.3 |
| 10/17 | 4:00 PM | Aug Net TIC Flows | n/a | 2.078 |
