What the Dutch Government’s Seizure of Nexperia Teaches Us About Political Risk Management

On September 30, the Dutch government became the first in Europe to effectively seize control of a company on national security grounds, invoking an obscure Cold War-era law to freeze the assets of Nexperia, a Netherlands-headquartered semiconductor company. The intervention arose from fears that the company’s intellectual property and operations would be moved from the Netherlands to the People’s Republic of China (PRC). Citing  “serious governance shortcomings, the Dutch government acted to protect the European supply of Nexperia chips,  which accounts for 40% of the global production of a simple, yet crucial, microchip used in car parts such as transistors, airbags, and sensors.

In the months that followed, many of the world’s largest car manufacturers, including Volkswagen and Mercedes-Benz, sounded the alarm and scrambled to secure microchips, fearing their production lines would come to a halt. The PRC government responded with export controls that prohibited Nexperia’s PRC-based factories from exporting finished semiconductors. The price of Nexperia chips rose tenfold. Leading European and American auto associations representing the world’s largest car manufacturers called on the Dutch and PRC governments to urgently resolve the issue. Car manufacturer Stellantis, a multinational firm headquartered in the Netherlands, set up a ‘war room’ to manage the expected chip shortages.

Although the origins of the Dutch government seizure lie in the protection of national production, the Nexperia crisis exemplifies how an otherwise ordinary company can become entangled in modern-day geopolitical rivalries that reverberate throughout an entire industry. From politically exposed ownership to sudden export controls, the Nexperia crisis emphasizes the critical importance of political risk management when operating in a politically sensitive industry shaped by great-power rivalry. Business executives should take note of Nexperia’s lessons regarding the need for comprehensive risk management strategies to prevent politically-fueled business disruptions.

Doing Your Diligence

The first lesson Nexperia provides is the need for careful due diligence on companies that have a significant impact on one’s operations. The core of Nexperia’s issues stems from the company’s ties to the PRC. In 2018, Nexperia was acquired by Wingtech Technology Co., Ltd, a PRC-based semiconductor integration company, putting the Dutch entity under the control of a PRC-based parent company. Shortly after the acquisition, Nexperia’s CEO Frans Scheper was replaced by Zhang Xuezheng, a PRC national and the CEO of the minority state-owned Wingtech. While the seizure of Nexperia’s Dutch assets came as a shock to many in the car manufacturing industry, careful due diligence into the company’s corporate structure and Xuezheng’s personal interest exposed significant red flags.

Though the company has its headquarters in the Netherlands, Nexperia maintains deep ties in the PRC. Ownership checks identify that Nexperia’s parent company, Wingtech, is approximately 30% controlled by the PRC government through various shareholding entities. A reputational assessment of Nexperia would reveal that this ownership previously triggered political concerns, most notably when the UK government forced Nexperia to divest its 86 percent stake in a British microchip factory on national security grounds. This episode should have raised warning bells regarding Nexperia’s operations in the Netherlands.

Due diligence checks into Nexperia’s CEO Zhang Xuezheng add a clear conflict of interest to the company’s political exposure. A review of Xuezheng’s professional background identifies him as the owner of a PRC-based entity named WingSkySemi, a financially unstable chip manufacturer based in the PRC. According to Nexperia’s whistleblowers, Xuezheng allegedly used Nexperia as a vehicle to place extraordinarily big orders at WingSkySemi to rescue his struggling business. When Dutch authorities discovered the alleged plan to transfer Nexperia technology to WingSkySemi, it took action to protect its access to the important semiconductors produced by the company.

For car manufacturers receiving Nexperia chips, extensive due diligence checks into Nexperia’s political exposure, past red flags, and its CEO’s conflict of interest could have allowed manufacturers to identify potential risks of their business partners. The Nexperia crisis exemplifies how enhanced due diligence can protect your business from financial and reputational risk and liability.

Operation in a Tense Geopolitical Environment

The Nexperia crisis highlights the importance of understanding and preparing for geopolitical shocks to your operations, especially in politically-charged industries. Though the Dutch government justified its actions as a measure to protect national interests, the decision occurred amidst an American and PRC rivalry in the semiconductor industry. By the time the Dutch government intervened, regulatory pressures from Washington had raised concerns over Nexperia’s operations because of its ownership structure.

In December 2024, Wingtech was placed on the U.S. entity list. This list places trade restrictions on foreign companies for their believed negative impact on U.S. foreign policy interests. The actions against Nexperia’s parent company were followed by a warning from U.S. officials to Dutch authorities that Nexperia could be limited in its ability to export to the U.S. as long as the company maintained a PRC CEO. One day before the Dutch government announced its intervention at Nexperia, the U.S. Department of Commerce acted on this warning by stating it would expand its entity list to include companies at least 50 percent owned by current entity list members. Under Wingtech’s ownership, this would have placed Nexperia under U.S. sanctions.

Export controls are becoming increasingly common in the geopolitical rivalry between the U.S. and the PRC. Critical industries for both consumer and military products, such as semiconductors, are leveraged by both global powers to limit each other’s technological advancements. Over the past few years, both the U.S. and the PRC have implemented sanctions, export controls, and tariffs to reduce the flow of certain goods.

As tensions between Washington and Beijing may continue to increase, European private enterprises ought not only to monitor but to understand the impact of government action on their operations. New measures, such as the expansion of the U.S. entity list, highlight the need to continuously monitor how government actions could limit the operations of business partners and suppliers. Even if your organization does not directly source from sanctioned entities, any sanctioned links in your supply chain could cause significant disruptions.

The PRC Chokepoint

The PRC’s response to the Dutch seizure of Nexperia highlights significant vulnerabilities in industries controlled by PRC-based companies. Over several decades, the PRC has created near-monopolies in various industries, including critical technology manufacturing, giving the PRC government significant influence over global supply chains. The PRC processes 90% of global rare earth materials, the building blocks for many of the world’s important technologies, such as vehicles and cell phones, and plays a critical role in finalizing semiconductor production.

Following the Dutch seizure of Nexperia’s Dutch factory, the PRC government prohibited Nexperia’s PRC-based factories from exporting finished components. Despite Nexperia’s large semiconductor production in Europe, its reliance on PRC-based factories to turn these chips into usable products exemplifies the dominance of the PRC in many supply chains. As the Sino-American geopolitical rivalry intensifies, the PRC government recently announced its 2026-2030 Five-Year Plan, which emphasizes a greater use of export controls to defend PRC’s interests— measures that could undermine the availability of critical components for technology manufacturing. In June, such actions halted the production of Ford’s Chicago factory line after the PRC suspended rare-earth exports.

In the coming years, companies can expect an increasing exploitation of such chokeholds in the Sino-American trade war, requiring comprehensive risk assessments and business continuity plans to prevent significant disruptions. Due to the PRC’s near-monopoly in rare earth processing and magnet production, it may not be possible to avoid all risk by moving supply chains. The PRC’s decades-long strategy to take on manufacturing processes considered too environmentally risky or too expensive by the Western world gives the country significant influence over the supply of critical goods and minerals. At the same time, attempts to “reshore” or “friendshore” supply chains away from countries considered high-risk have proven challenging for a variety of factors including skill gaps and capital costs. Addressing such challenges requires time and investment.

Chokeholds, therefore, create a need for risk assessments to assess whether specific supply chain risks are acceptable or need to be addressed. Options to address supply chain risks could include risk mitigation by diversifying supply chains to the extent possible or reducing reliance on just-in-time production by increasing inventory to prevent sudden shocks. Another option, risk transfer, could reduce the risks associated with supply chain disruptions by transferring the financial risks to a third-party such as an insurance agency.

Preparing for the Next Nexperia

The Nexperia case shows a perfect storm of geopolitical risks that companies must address to prevent major disruptions. Political risk has become a fundamental reality for any organization dealing with international supply chains. Beyond the perils of climate change and cyber threats, C-suites must understand the political trends shaping the business environment. The Nexperia crisis highlights how a single kink in a vast supply chain can result in the upheaval of entire industries. From due diligence assessments to supply chain analyses, companies must understand and address the risks associated with their business to be prepared for the next Nexperia.

Views expressed are the author’s own and do not represent the views of GSSR, Georgetown University, or any other entity. Image Credit: Caixin Global