Dutch takeover of Nexperia threatens German auto industry and 1,600 jobs

The Dutch government’s takeover of the Chinese semiconductor manufacturer Nexperia could have serious consequences for Germany.

Under intense pressure from the US, The Hague removed Zhang Xuezheng, the head of chip manufacturer Nexperia, from his position and placed the company into receivership. Zhang is the founder of the Chinese group Wingtech Technologies, which has owned Nexperia since 2019.

The official purpose of this measure was to prevent Nexperia from being placed on the US sanctions list, known as the “entity list.” Otherwise, the company would have become effectively unable to operate.

The legal basis for the removal of Zhang and Wingtech is a never-before-implemented 1952 law intended to secure Dutch supplies, particularly in times of war.

Beijing opposes this unprecedented measure. The Dutch government collaborated with European Nexperia executives in the preparatory phase. A German executive is currently managing the company.

Meanwhile, the effects of placing Nexperia into receivership could spread throughout Europe. This situation will jeopardize 1,600 jobs in Hamburg and eliminate a key chip supplier for the German automotive industry.

The Hague “conspired” with Nexperia’s European executives

According to the Wall Street Journal (WSJ), the conspiratorial activities carried out by Dutch authorities in collaboration with European Nexperia executives were successful.

Just one day after the entity list was expanded to include subsidiaries of publicly traded companies, including Nexperia, the Dutch Ministry of Economic Affairs took control of the chip manufacturer.

A day later, on October 1, a Dutch court approved the dismissal of Nexperia CEO Zhang Xuezheng, the founder of Wingtech, and temporarily transferred the management of all but one of the company’s shares to a trustee. On October 7, the court confirmed this with a formal decision.

The judges rejected the objections of Wingtech’s lawyers, who argued they were “crushed in a summary trial process unworthy of a constitutional state.”

China reacted quickly to the Netherlands’ removal of the company’s CEO, ordering Wingtech to halt product exports and take emergency measures to protect its property.

On Monday, a spokesperson for the Chinese Ministry of Foreign Affairs affirmed that the People’s Republic of China is “determined” to defend its “rights and interests.”

Nexperia’s importance for Germany

Germany and German Nexperia executives are affected by and involved in this development in various ways.

Nexperia produces relatively simple semiconductors, such as those for the automotive industry. These semiconductors are otherwise mostly imported from China.

However, these imports are in large quantities: according to reports, the company supplies 63 billion components annually to companies in the automotive industry. The company is said to be “a key supplier for many customers in Germany.”

Its most important production facility is in Hamburg, employing approximately 1,600 people. The factory is currently being modernized at a cost of about 175 million euros.

Hamburg is also the base for the company’s current senior executives, Achim Kempe (Chief Operating Officer) and Stefan Tilger (Chief Financial Officer).

However, the German government has placed obstacles before Nexperia due to its Chinese ownership, ultimately leading to the company’s exclusion from the important EU funding program IPCEI.

Due to the conflict between the West and China, Kempe had reportedly planned to establish separate supply chains for customers in Europe and China to protect the company from sanctions.

Is there a German hand in the Dutch move?

It is unclear what role the German members of the company’s management played in the events and whether they were the ones with whom the Dutch government had been conspiring for months to seize control of the subsidiary from Wingtech.

What is clear now is that CFO Stefan Tilger has been appointed as the interim head and tasked with ensuring Nexperia is not placed on the US entity list.

This clearly means he must act as the person implementing US demands.

If the US were to sanction Nexperia, production would likely become unsustainable for a long time: essential materials are supplied by US companies, while the machinery is maintained by US companies.

If Nexperia fails, there is a risk of a serious semiconductor shortage in the automotive industry.

But it is equally uncertain what consequences China’s resistance to the disempowerment of Wingtech will bring and what steps Beijing will take against the escalating attacks on Chinese companies and their interests.