Risk and Cooperation in Parallel: Europe Redraws Its Technology Boundaries with China

In the second half of 2025, the Dutch government invoked emergency legislation to intervene in Nexperia, a Netherlands-headquartered chipmaker controlled by China's Wingtech Technology. China subsequently restricted exports of chips packaged by the company on Chinese soil. Between 70 and 80 per cent of Nexperia's wafers are sent to China for processing, testing and packaging.

Once supply was disrupted, European companies including Volkswagen and Bosch cut back or suspended parts of their production lines. The mature-node chips affected have historically drawn less policy attention than advanced semiconductors, yet they are widely used in automotive and medical equipment, and also underpin robotics and aerospace-defence products. The Nexperia episode exposed a blind spot in Europe's technology security: companies headquartered in Europe but highly dependent on China for production.

Shifts in Germany's automotive trade with China illustrate the adjustment in industrial positioning between the two sides more directly. In 2022, Germany exported €19.5bn worth of cars to China while importing just €700mn from China. Extrapolating from data for the first four months of 2026, full-year exports to China could fall to €3.7bn while imports from China rise to €4.5bn, potentially flipping automotive trade from a surplus into a deficit. Over four years, Germany's export advantage in automobiles to China has narrowed sharply.

Cars are just one example; similar pressure has begun to appear in other sectors where Europe holds an advantage. China, once primarily a key market and production base for European companies, is increasingly becoming a source of products and technology in some fields, and is catching up with domestic European companies at a faster pace.