FILE — President Donald Trump and President Xi Jinping of China at the G20 Summit in Osaka, Japan, June 29, 2019. . (Erin Schaff/The New York Times)

In a move that highlights the geopolitical tightrope countries are walking in the US-China battle for technological supremacy, the Dutch government has seized control of a Chinese-owned chip company, Nexperia. The rare takeover, announced this week, follows significant pressure from Washington and has prompted a strong rebuke from Nexperia’s parent company.The Dutch government cited “serious governance shortcomings” as the official reason for the takeover. However, court documents published Tuesday reveal a more direct catalyst: American officials had warned the Dutch government that Nexperia’s CEO, Zhang Xuezheng, would likely need to be replaced for the company to be removed from the U.S. “entity list,” which imposes strict export restrictions. The Amsterdam Court of Appeal document cites minutes from a June meeting between Dutch and American officials, where the U.S. Bureau of International Security and Nonproliferation stated. “The fact that the company’s CEO is still the same Chinese owner is problematic,” the minutes of the meeting said, as cited by the document. “It is almost certain that the CEO will have to be replaced to qualify for the exemption from the entity list.”

US-China trade tension

The intervention comes as the U.S. and China continue to escalate their tech war. In a recent move, the U.S. Commerce Department expanded its entity list, placing any subsidiary that is at least 50% owned by a blacklisted firm under the same restrictions. This new rule implicated Nexperia, which is a fully-owned subsidiary of Wingtech, a partially state-owned Chinese company that has been on the list since late last year. The Dutch economic ministry took what it called a “highly exceptional” action to prevent Nexperia from making goods that could become unavailable in a crisis.

Global squeeze on supply chains

Nexperia, headquartered in Nijmegen, produces lower-end chips used in consumer electronics, automobiles, and industrial applications, and operates facilities in both Germany and the U.K. The company confirmed that following a court order, CEO Zhang Xuezheng has been suspended from his position.The dispute isn’t one-sided. In early October, China also imposed export controls, barring Nexperia and its affiliates from exporting certain components manufactured in China. The company is currently seeking an exemption from these restrictions.Wingtech, Nexperia’s parent company, has vowed to “never succumb to external political pressure.” The company called the Dutch government’s takeover “discriminatory treatment” and stated that it has initiated all legal and diplomatic channels to demand the revocation of the decision.