The Small Company in Europe Caught in the Big Trade War Between the U.S. and China

Business|The Small Company in Europe Caught in the Big Trade War Between the U.S. and China

Late last month, Washington’s intensifying contest with Beijing for control over tech supply chains spilled over in the Netherlands. The Dutch government, under pressure from U.S. officials, took control of the Chinese-owned chip maker Nexperia.

Nexperia, which is headquartered in the Netherlands but owned by the Chinese company Wingtech, operates a complex, globe-spanning supply chain typical of chip manufacturing. The company designs older types of chips used in cars and electronics and employs thousands of people across Europe, the United States and Asia. Its factories press thin slabs of silicon in Britain and Germany, and assemble and test chips in China, the Philippines and Malaysia.

On Sept. 30, the Dutch government declared that company decisions would now be determined by its minister of economic affairs, Vincent Karremans. Hours earlier, the United States had expanded the scope of a trade blacklist that meant Nexperia would face strict controls on its operations because its owner, Wingtech, was already on the list.

In a statement on Sunday revealing its action, the Dutch government said it moved to prevent Nexperia’s products from becoming unavailable in an emergency. But documents published in an Amsterdam court on Tuesday showed that months earlier, U.S. officials had pressured the Dutch government about the company’s ownership.

The United States Department of Commerce placed trade restrictions on Wingtech last December. In June, American officials told the Dutch Ministry of Foreign Affairs that Nexperia could be next, unless the company replaced its Chinese chief executive, Zhang Xuezheng.

“The fact that the company’s C.E.O. is still the same Chinese owner is problematic,” the American officials said, according to the court documents.

Nexperia is just one of the companies caught in the middle of a battle for control of the global chip industry, as Washington and Beijing have claimed sweeping authority to control supply chains for semiconductors and minerals, critical inputs for everything from cars to artificial intelligence systems.

As the United States and China flex their influence over supply chains, other countries will seek to unwind Chinese ownership of key technology assets on national security grounds, said Reva Goujon, a director at Rhodium Group, a research firm. Nexperia was an obvious target.

The Chinese government has spent billions on the goal of boosting its domestic industries, and Chinese companies like the state-affiliated investors that sold Nexperia to Wingtech also ramped up acquisitions of foreign firms that make chips and other technologies.

While Chinese chip makers have struggled to make the cutting-edge chips that power advanced A.I. systems, they make an increasingly large share of older types of chips. Some officials in the United States and Europe have grown concerned that China could come to dominate the market for those chips. Even though they are less advanced, they are used in cars and a wide array of machinery and appliances.

Now, many governments want these supply chains back under their control, Ms. Goujon said.

“There have been some very big regrets,” Ms. Goujon said. “All these governments are very uncomfortable with that and would like to see these assets back in their possession.”

Days after the Dutch government took control of Nexperia, China’s Ministry of Commerce issued a notice barring Nexperia’s Chinese units from exporting some products, the company said in a statement on Tuesday.

The company is seeking an exemption from the Chinese controls and “has deployed all available resources to that end,” the statement said.

China’s Ministry of Commerce has not publicly commented on its restrictions on Nexperia. He Yongqian, a spokeswoman for the ministry, said at a briefing on Thursday that Washington’s expanded controls had “seriously undermined the security and stability of the global industrial supply chain.”

The Dutch government’s takeover of Nexperia was “a clear example of how the American rule harms the legitimate rights and interests of Chinese companies,” Ms. He said.

Beijing exerted its influence over another part of global technology supply chain last week when it announced sweeping controls on critical minerals that are used in chips, cars, missiles and more. The new rules closely resembled American technology controls that Chinese officials have long criticized.

The Chinese government also targeted an industry that it sees as crucial for its own security and economic growth: shipping. On Tuesday, Beijing imposed sanctions on American subsidiaries of the South Korean shipping company Hanwha, accusing them of “supporting and assisting” the United States with its shipbuilding industry.

The order took effect immediately and bars Chinese companies and individuals from doing business with the Hanwha units.

Ms. Goujon at Rhodium Group said governments will continue to look for ways to regain control of critical technology manufacturing as the contest for influence escalates between Washington and Beijing. “This has been building for a long time,” she said.