From Chips to Politics: A Case for Structural EU Reforms

By Ramon Rahangmetan

Written by: Koen Moermans

Reading time: 5 minutes

Dutch Intervention in Nexperia: A Case for Structural EU Reforms

The Dutch government got itself into a feud with China over the Chinese-owned microchip company Nexperia, headquartered in Nijmegen, the Netherlands. On the surface, it looks like an uncommon government intervention in a foreign-owned company. However, it cannot be separated from the larger picture: one of increasing great-power rivalry and European-based companies getting caught in the middle.

This case is one of the latest valuable lessons and should serve as a wake-up call for broader European strategic autonomy, where structural reforms should ensure anticipatory governance rather than reactive crisis management. The argument becomes even more pertinent in a world that is accelerating the green transition, with the EU aspiring to be a leading force.

 

From Tech to Politics

On September 30th, 2025, the Dutch government invoked a law to seize control over the chip manufacturer Nexperia, headquartered in Nijmegen, the Netherlands, which had been owned by Chinese investors since 2017 and changed hands again in 2019 to the partially Chinese state-owned Wingtech. Subsequently, on October 7th, the Dutch Enterprise Chamber issued a ruling that removed Nexperia’s CEO and Wingtech founder, Zhang Xuezheng, from his position.

What followed was a diplomatic standoff between the Netherlands and China, and the European and Chinese units in disagreement on how to react. The reasons cited for these actions were the risk of technology leakage and executive malfunctioning that seriously endangered the future of the company.

However, it is difficult to view these events separately from the export restrictions issued to Wingtech by the US on September 29th. The fear of a US cutoff for a company vital to Dutch and European interests likely contributed to the urgency. The uncomfortable position in which Nexperia finds itself stems from the 2017 takeover of NXP’s Standard Products Division, which did not generate much pushback at the time. In recent years, the debate around strategic autonomy has become more vivid, and the Dutch government has acquired greater ability to intervene if foreign investments appear to undermine strategic interests.

The EU introduced an investment screening framework through the EU FDI Screening Regulation. Subsequently, the Dutch government implemented and expanded upon it through the 2020 implementation law and the 2023 Vifo law. Even though these were not the policy instruments used in the Nexperia case, they demonstrate the expanded capacity that the Dutch government and other EU member states now have to intervene when strategic interests are at stake.

The lack of action during the Nexperia takeover in earlier years resulted in unprecedented and risky measures to prevent the deterioration of the Dutch future of a company vital to its strategic interests.

This is an example of increased securitization of high-tech, vital industries. At the time, the acquisition of Nexperia was predominantly viewed as an economic transaction, not triggering widespread debate. Six years later, the issue receives far greater scrutiny, rightfully so, as possessing links in the chip supply chain is increasingly vital to Europe’s strategic autonomy. This illustrates the increasing emphasis on strategic autonomy in the public debate and could be interpreted as a lack of responsible securitization in the preceding years.

The Nexperia incident serves as a shock to NL–China relations and to the global supply chain of microchips. It should also serve as a moment of reflection for EU policymakers to break the pattern of reactionary mitigation policy and build strategic capacity to safeguard Europe’s long-term viability in technology and the economy.

The Commission has been working on several initiatives, many of which have passed through the legislative process in recent years, but generally lack strong structural backing. This illustrates a broader malfunctioning of the EU integration agenda, in which further removal of internal barriers appears to have stagnated at a time when economies of scale, unified policy, and a clear vision for the future are more pertinent than before.

Triangle of Interdependence 

China is gaining a strong foothold in many aspects of global supply chains in critical industries and even dominates some of them—such as batteries, critical minerals processing, and solar panel production—generally aided by long-term state planning and funding. It is also seriously competing with the US in the AI race, although it is currently unable to match its competitor’s might.

The US has grown increasingly wary of its vulnerable position vis-à-vis critical industries and China, exemplified by Biden’s CHIPS and Science Act to boost domestic microchip manufacturing. It is also using coercive trade instruments to incentivize domestic production and prevent the flow of high-tech know-how to China.

Washington still holds a strong deck of cards, with American companies indispensable in the semiconductor, quantum computing, biotech, military, and AI industries. Europe is unable to match either the Americans or the Chinese but cannot be disregarded. It holds leading positions in vital segments of critical industries.

Dutch ASML is an essential link for the most advanced microchips, French Airbus leads in commercial aviation, significantly contributing to Europe’s defense and aerospace capabilities, and Danish Vestas is a global leader in wind turbine manufacturing, albeit seriously challenged by cheaper Chinese turbines. In the context of increasing great-power rivalry, Europe needs a vision to prevent unwanted disruptions and entanglements.

Europe holds some cards, but the larger decks are held by the US and China, whose presence in vital industries is vast, profound, and more dominant. Europe depends on China for production and upstream materials, and on the US for technology, military protection, and digital infrastructure. This asymmetry limits Europe’s room for maneuver and leaves it with dual exposure to great-power rivalry. This dynamic is exemplified by the Nexperia incident, in which a European member state fears US export controls and walks directly into Chinese countermeasures. It is unrealistic to assume Europe can match either the US or China.

The EU lacks a fully realized economy of scale and a decisive, consistent policy framework like the US, and it lacks a coherent state-capitalist philosophy and centralized long-term strategic thinking of China. Nevertheless, it is vital for Europe’s future to pursue greater strategic independence through diversification and increased domestic capabilities in order to minimize being pushed and pulled by the current of global politics. This would help Europe sustain a baseline commitment to its democratic values and human rights, both at home and abroad. It would also serve as a counterbalance to other powers on the global stage and ultimately help preserve the well-being and freedom of the people of Europe.

The EU’s Strategic Autonomy 

So what has the EU been doing so far? The Commission is slowly waking up, presenting numerous regulatory initiatives over recent years—notably the Net Zero Industry Act, the Critical Raw Materials Act, the European Chips Act, and the RESourceEU Action Plan. These initiatives signal awareness, but without deeper structural reforms they remain shallow tools. The 2024 Draghi Report set out a roadmap for increasing the EU’s economic competitiveness, which is foundational for strengthening critical industries.

However, the former president of the European Central Bank himself has pessimistically concluded that despite partial implementation of his proposed measures, the EU’s relative position on the report’s core issues has worsened rather than improved over the course of a year. Structural reforms require internal support, but such support appears to be lacking. The integration agenda has been increasingly scrutinized by growing populist nationalist movements.

In addition, smaller veto players have managed to punch above their weight in blocking EU-wide proposals. Foundational to integration resistance is the tendency of some national politicians to cultivate and amplify anti-EU sentiment for personal or national gain. Crucially, anti-EU sentiment is not purely a grassroots reaction but, at least partially, an elite-driven erosion of trust in a project that requires belief and political will to function. These politicians do not sell the story of a successful peace project that is also vital for Europe’s geopolitical interests; instead, they frame Brussels as an overbearing elite that begrudges you for your plastic straw.

Ironically, the anti-EU sentiment that is mobilized is itself a top-down phenomenon, mirroring the dynamic it claims to resist. Declining support for further integration narrows the space for the structural change the bloc needs to survive in the geopolitical environment of the 21st century. From an international relations perspective, the EU integration agenda is urgent. The EU requires deeper integration to ensure its internal market remains competitive in critical industries that are vital to its strategic autonomy. Completing the capital markets union would help mobilize greater resources for investment.

Further integration of energy policy and electricity grids would strengthen the bloc’s industrial base by providing cheaper and more reliable energy, as high energy prices are frequently cited as a major obstacle to industrial competitiveness. In the defense sector, increased collective procurement would help decouple defense industry quality and scale from national interests, resulting in more standardized, technologically advanced military equipment—where two or three winners compete with highly capable missile systems or tanks rather than twenty-seven. Greater emphasis on digital market integration would reduce fragmentation, enabling scale effects that are currently unavailable to European digital firms.

These reforms directly tackle the underlying fragmentation that prevents the Union from functioning as a fully harmonized market, rather than retrospectively attempting to rechannel the output of the current unfinished market through Commission initiatives. Fundamentally transforming the Union into a genuinely complete market would boost the EU’s competitiveness in critical industries and strengthen its ability to defend the interests of the people of Europe. Yet the supranational vessel moves slowly and is constrained by its internal design. To navigate the waters ahead, it will need to structurally adjust its course.

The EU’s Green Strategic Autonomy 

Coupled with the EU’s climate goals, its position in critical industries becomes a double-edged sword worthy of attention. It creates significant opportunities but also carries the risk of increasing the EU’s vulnerability. Ambitious climate policy combined with enhanced strategic focus and backed by structural reforms presents a unique opportunity. In a global economy trending toward greenification, this could generate competitive advantages through new export markets, greater independence, increased energy reliability, and enhanced legitimacy for Europe as a global leader.

This applies to clean technology as well as other sectors, such as Danish wind turbine manufacturing and German electric vehicle production. It also applies to industries such as semiconductor manufacturing and biotechnology. As industries are interwoven and holistically deployed in global power competition, the EU should apply a comprehensive and integrated approach. The downside must also be acknowledged: sustained climate ambitions combined with a deteriorating strategic position would heighten Europe’s vulnerability by increasing reliance on foreign suppliers for clean technologies and other strategic products, while simultaneously reducing the EU’s domestic capacity to produce impactful goods for both domestic and global markets.

The Nexperia case demonstrates that the time has come for a renewed vision—a Europe prepared for stormy waters ahead. A renewed appreciation of the European integration project enables structural reform and greater strategic thinking and will help Europe navigate these challenges. Let Nexperia serve as yet another wake-up call.

My name is Koen Moerman, 22 years old, and currently based in the Netherlands. I am internationally-oriented and fascinated by the European integration project. I believe that in an evermore interconnected world, cross-border thinking should become the new political paradigm. At Circle of Sustainable Europe, I want to contribute to a better understanding of transnational issues, mainly focussing on sustainability and power. I am excited to be part of the international team and to contribute to the greater cause of CoSE.

 

Sources:

Clingendael: Geopolitieke factoren in relatie tot Policy Brief China als grond voor toetsing van buitenlandse directe investeringen: https://www.clingendael.org/sites/default/files/2021-01/PB_Geopolitieke_factoren_NL.pdf

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