(Bloomberg) -- The Dutch government will start an investigation into the takeover of a local chipmaker by a Chinese-owned firm as the Netherlands steps up controls of the industry amid a chip spat with the Asian nation.

Authorities will use a new legislation to review semiconductor maker Nexperia’s acquisition of Netherlands-based Nowi, according to Economic Affairs Minister Micky Adriaansens. The move comes as the country will for the first time have the power to stop foreign takeovers of Dutch companies on national security grounds, with the new law taking effect on Thursday.

“At the moment, Russia and China” are among countries the Netherlands needs to be “extra alert” about, Adriaansens said in an interview Wednesday in The Hague. There are many areas where Dutch companies can do business with China but in some fields “we are really vulnerable,” the minister added. 

The Netherlands has been rethinking its ties with China, one of its biggest trading partners. Earlier this year, the Dutch government agreed to join the US effort to further restrict exports of chip technology to China. 

“With sensitive technologies like photonics, quantum, radar technology, sensor technology, chips,” there is a risk they may be used for military purposes, Adriaansens said. “That knowledge we have to protect.” The Dutch government will also investigate a “handful” of other acquisitions retroactively, she added.

Nowi, which produces small chips that makes it easier for companies to power their devices with energy harvesting, was bought by Nijmegen-based Nexperia in November. Nexperia itself was sold to Chinese investors in 2018, when Wingtech Technology Co. acquired the Dutch chipmaker for 25.2 billion yuan ($3.6 billion). Wingtech took control of the company by consolidating a slew of stakes in Nexperia, which had been hived off from NXP Semiconductors NV to a consortium of Chinese investors. 

The Investments, Mergers and Acquisitions Security Test Act, which will enable the Dutch government to limit the size of investments or block a deal on the basis of national security, will cover takeovers that occurred since September 2020. The legislation wouldn’t allow the government to investigate Nexperia’s takeover by Wingtech.

Dutch Say Russia, China Are Top Threats to National Security 

Countries from Canada to the UK routinely use their power to scrutinize and sometimes block investments or acquisitions on national security grounds. The UK cited national security concerns when it ordered Wingtech’s Dutch subsidiary in November to undo its acquisition of Britain’s biggest microchip factory more than a year after the deal closed.

A company eying a takeover in the Netherlands won’t necessarily get a straight approval or rejection from the government, the minister said. “You can change the distribution of control, you can make agreements about the level of involvement with the operational process, you can shield certain knowledge,” she said, adding that the government can also decide to participate in an acquisition.

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