How the Dutch turned on Chinese tech

“I can’t see how this will be the century of China.” 

In a recent op-ed, Dutch Prime Minister Mark Rutte made no secret that, in the new global order of dueling blocs, he had chosen Washington’s side — not that of Beijing. The Netherlands, the rich European country he’s led for over a decade, has closely mirrored the U.S. and turned increasingly hawkish against China, especially in the race for tech supremacy. 

In the past months, the Dutch have overhauled their ties with China in a number of areas involving sensitive technology. The biggest shift came Wednesday, when, in a bombshell announcement, the government said it would impose new export controls on China on advanced microchips technology sold by Dutch tech champion ASML. The Dutch decision implements a political deal struck in January with the U.S. and Japan to choke off the supply of cutting-edge chips to China.

The move prompted the European Union’s trade chief Valdis Dombrovskis to try and close ranks on Thursday, pitching a more unified EU approach on export controls, urging “a stronger EU role to ensure coherence in our policies on security, trade and technology.”

In November the Dutch government recommended staff not to use the Chinese-owned video-sharing application TikTok for government work, an early sign of trouble for the social media firm that came months before European Union officials imposed bans on TikTok on work phones in February.

And in December, the government signaled it could go after a takeover of a Dutch chips firm called Nowi by Nexperia, owned by Chinese tech firm Wingtech, as a test case for a new Dutch law seeking to block unwanted foreign or domestic ownership of strategic assets. 

The changed stance toward China is no less than a paradigm shift for the country once known as one of the — if not the — most ardent European defender of global free trade.

It also puts The Hague in good favor with Washington, where President Joe Biden received Rutte in January. The Netherlands is also one of five co-host countries of a U.S.-led Summit for Democracy later this month, a platform launched by the Biden administration to defend democratic values at the international level.

Dutch officials are keen to stress they’re calling their own shots on how to handle China. “This decision was really a unilateral decision. It was not a tit-for-tat-deal,” Dutch Foreign Trade Minister Liesje Schreinemacher told reporters Thursday. But, she added, “our prime minister was in Washington not too long ago. There they [Biden and Rutte] have also emphasized the strong connections as trading partners.”

Behind The Netherlands’ pivot on Chinese tech is a fear that it risks losing its technological edge if it doesn’t protect intellectual property and innovation leadership better.

“It is of importance that this leadership, technologically, remains in the West,” PM Rutte told Dutch television of restricting exports to China after he met with Biden.

IP protectionism

Wednesday’s announcement to stop exports of advanced chips technology so far marks the sharpest turn against Beijing by The Hague.

ASML, based in Veldhoven in the south of The Netherlands, manufactures lithography machines to print patterns on silicon, a procedure that is key for the mass manufacturing of chips that fuel booming tech industries like smartphones and consumer goods but also 5G, automotive technology and other critical products.

It is Europe’s highest-valued tech company, and the only company in the world to produce machines that use extreme ultraviolet lithography technology (EUV). For these machines, it has already failed to receive export licenses since 2019 to sell these printers to China.

The new restrictions now target an advanced class of printers by ASML that use the (slightly lower-grade) deep ultraviolet lithography technology (DUV), tech used by the Dutch firm and just a few competitors in the U.S. and Japan.

The tech mastered by the Dutch is crucial in the U.S.’s strategy to choke off Chinese capacity to build advanced chips. Washington imposed export restrictions on chips-printing equipment to China for its own companies in October but had to make sure that other sources of supply were cut off as well.

“We have the industry that China also expresses interest in,” said Maaike Okano-Heijmans, a senior research fellow at the Clingendael Institute. “We bump into China fairly quick, much sooner than other EU states.”

Some of that collision has turned ugly. Data on ASML’s proprietary technology leaked via “a (now) former employee in China,” the company said in February, adding the leak “may have violated” export control rules. It echoed a similar incident ASML reported in 2019 that it had been the victim of intellectual property theft by employees in countries including China.

These incidents match warnings by Dutch intelligence services in the past years. “China in particular is trying to acquire technological and other scientific knowledge. Mostly through digital attacks but also through students and scientists studying or doing research at Dutch knowledge institutes,” the General Intelligence and Security Service (AIVD) said in its most recent annual report.

“The Netherlands was always a free-trade country par excellence, and still attaches a lot of value to that, but not at any cost, and not at the cost of national security,” said Roos Elemans, senior associate at law firm Stibbe’s Amsterdam office. 

Foreign investment screening

Its critical role in some of the world’s most advanced technologies, coupled with its fears and traumas of challenged leadership, means The Netherlands has bought into the U.S. strategy to stop the rise of Chinese tech.

“One and a half year ago, someone from the economy ministry said: we are in the midst of a paradigm shift,” Okano-Heijmans says about the government’s thinking about China. 

The country is now also rolling out plans to enhance the screening of investments, mergers and acquisitions. A new law poised to enter into force by the summer would give Dutch officials new powers to scrutinize when there’s a change of ownership at companies involved in “sensitive technology” like semiconductors, quantum computing or photonics. 

Already the government has a takeover linked to China in its crosshairs. In November, microchips maker Nexperia, which is owned by Chinese tech firm Wingtech, announced it would acquire the small Delft-based startup Nowi. But at the end of December, Economy Minister Micky Adriaansens warned that she could still call in the acquisition for a national security check.

While its microchips technology is in the spotlight today, The Netherlands can expect future rounds of geopolitical tussling over technology to affect it as well, experts flagged.

“On the U.S. list of export controls, there’s also photonics, quantum and supercomputing,” Okano-Heijmans said. “The Netherlands is a big player in these areas too, with only a limited amount of countries globally.”

Stuart Lau contributed reporting.

This article was updated to include new developments.