Dutch government took control of Nexperia over fears it was being gutted

AMSTERDAM (Reuters) – The Netherlands’ decision to take control of chipmaker Nexperia in September was motivated by fears that the company’s former CEO would break up the company’s European operations and move production to China, four sources in The Hague familiar with the government’s thinking said on Monday.

A month-long tension between China and the Netherlands over Nexperia has led automakers in Europe, the US and Japan to warn of possible production problems due to chip shortages. Although the chips produced by Nexperia are very simple, they are used in large numbers in car electronic systems.

Sources in The Hague said former Nexperia CEO Zhang Xuezheng, who is also the founder of Nexperia’s Chinese parent company Wingtech, plans to lay off 40% of staff in Europe and close a research and development facility in Munich.

Before Zhang was removed from his post as CEO by a Dutch court on October 1, he was said to have already transferred secrets, including chip designs and machine settings, from the company’s factory in Manchester, England, to a facility owned by Wingtech in China. Officials added that it is now planned to acquire physical equipment from the company’s Hamburg production facility.

Zhang could not immediately be reached for comment.

The Dutch government took control of Nexperia on September 30, citing management flaws. On October 4, the Chinese Ministry of Commerce blocked the export of the company’s products outside China. While most of Nexperia’s chips are manufactured in Europe, about 70% are packaged in China before distribution.

The company’s Chinese arm took steps toward independence and resumed selling products to domestic Chinese customers.

Sources said the Dutch government believes it can negotiate a decision with China that would bring the company into a unified Dutch-China structure.

(Reporting by Toby Sterling, Editing by Rosalba O’Brien)