The Hague: The Dutch government has taken the “highly exceptional” step of intervening in the operations of Chinese-owned semiconductor firm Nexperia, citing potential risks to Dutch and European economic security.

The decision, announced by the Ministry of Economic Affairs, invokes the country’s Goods Availability Act, which allows the government to act in extraordinary circumstances to safeguard critical goods and ensure national economic stability. Officials said the intervention was triggered by “acute signals of serious governance shortcomings” within Nexperia.

“The measure is intended to prevent a scenario in which Nexperia’s chips could become unavailable in an emergency and to protect crucial technological knowledge and capabilities on Dutch and European soil,” the ministry said. The company’s production is expected to continue as normal.

Nexperia, which produces semiconductors used in automobiles and consumer electronics, is owned by China’s Wingtech. Wingtech has expressed its intent to protect its rights and seek government support in response to the Dutch action. Shanghai-listed shares in Wingtech fell 10% on Monday following the announcement.

This move could further strain relations between China and the European Union, which have already been under pressure due to trade issues and Beijing’s close ties with Russia. Nexperia previously faced national security scrutiny in the UK, leading to the sale of its chip plant in Newport, Wales, although it still maintains a facility in Stockport.

The company is also affected by U.S. restrictions. Wingtech is listed on the U.S. “entity list,” preventing American firms from exporting goods to it without special permission. In September, the U.S. tightened these rules to include companies majority-owned by Chinese firms.

The Dutch government has not disclosed further details about the specific risks posed by Nexperia. Chinese diplomatic representatives in the Netherlands and Brussels have not yet responded to requests for comment.