Nexperia has suspended supplies of wafers to its Guangdong assembly plant almost three weeks after the Dutch government took control of Chinese-owned chipmaker.

According to a report from Reuters, the chipmaker sent a letter to its customers on October 29 saying the suspension of supplies was “a direct consequence of the local management’s recent failure to comply with the agreed contractual payment terms.”

It continued: “While we have maintained shipments for as long as commercially feasible, continuing the current flow of supply from our front-end sites is no longer justifiable… Unless these contractual obligations are fully satisfied, we cannot resume wafer supply to the site. Nexperia is developing alternative solutions to ensure [that] supply [is] continuing to our customers.”

The letter was signed by Nexperia interim CEO Stefan Tilger, Reuters said. Tilger replaced the company’s Chinese CEO, Zhang Xuezheng, following the takeover.

On October 12, the Dutch Ministry of Economic Affairs issued a statement that said it had taken control of Nexperia on September 30, it had invoked the Goods Availability Act due to “serious governance shortcomings” at the company. It added that these failings “posed a threat to the continuity and safeguarding on Dutch and European soil of crucial technological knowledge and capabilities,” and the measure was intended to “mitigate that risk.”

Earlier this week, Reuters separately reported that the Dutch government also stepped in due to fears that Zhang was in the process of dismantling the chipmaker’s European operations and moving production solely to China. The report went on to claim that Zhang had also transferred company secrets relating to chip designs and machine settings from Nexperia’s plant in Manchester, UK, to a plant in China belonging to the firm’s parent company Wingtech.

Based in the Netherlands, Nexperia has been wholly owned by China’s Wingtech since 2019. The chipmaker produces semiconductors for use in the European automotive industry and consumer electronics – the chips are manufactured in the Netherlands and then packaged in China, where they are mostly sold to distributors.