If you want to play hardball, better make sure you have the leverage. The Dutch government clearly doesn’t; now it’s caught in a bind. Its seizure of Chinese-owned chipmaker Nexperia while ousting its Chinese CEO Zhang Xuezheng is not only foolhardy, but plainly counterproductive. In claiming the need to protect national and economic security by taking control of and ensuring critical supplies of chips from the firm, the Netherlands has brought about exactly what it tried to avoid.
The controversial move, however, likely stemmed from American pressure, and must be understood in the context of the larger trade and tech war between Beijing and Washington.
As certain as day follows night, the Chinese have retaliated. With the support of parent company Wingtech Technology, Nexperia China has told its employees to ignore instructions from the Dutch head office. The Chinese commerce ministry has imposed an export ban on the Chinese firm and its subcontractors. Since many of Nexperia’s finished chip products are packaged and shipped from the Chinese mainland, this means there is now a significant disruption to the entire supply chain, affecting clients in car manufacturing and consumer electronics around the world, but especially in Europe. German carmakers are already sounding the alarm. Nexperia’s clients include Apple, Tesla and Samsung Electronics.
Dutch officials are now negotiating with the Chinese side, but clearly not from a position of strength. When Washington decided to impose either a ban or a forced sale of TikTok, negotiations went on for almost a year until its recent resolution.
The Dutch government could hardly have expected its rash decision to seize a foreign company to have avoided an immediate backlash, though it did apparently have a legitimate fear that the Chinese owners might relocate most of the Dutch production to their own country. However, it now has caused exactly the kind of supply disruption it claimed it was trying to avoid with its action.
The reality, though, is that Washington recently extended export restrictions to many subsidiaries of blacklisted foreign companies such as Wingtech, so the Dutch probably thought they had no choice but to take control of Nexperia if it was to continue to operate unhindered. As it turns out, the cure is worse than the disease.