China’s Wingtech Technology warned on Friday that its financial performance will take a hit in 2026 if it fails to regain control of Nexperia, its chipmaking arm seized by the Dutch government.

The company said in its third-quarter earnings that “if control of Nexperia cannot be restored before the end of 2025, the company may face temporary downward pressure on revenue, profit and cash flow.”

This warning came alongside stronger-than-expected quarterly results, with semiconductor revenue up 12.2% compared to the same period last year.

Wingtech, headquartered in Jiaxing, said demand across its semiconductor lines remained strong during the quarter, but acknowledged that the ongoing political conflict with the Netherlands makes future growth hard to predict.

The company admitted that the Nexperia situation is now a major uncertainty for its chip business, both financially and operationally.

Dutch seizure of Nexperia follows U.S. pressure

The Dutch state moved to seize Nexperia in September, after pushback from the United States over concerns that the chipmaker might not be acting independently of its Chinese parent.

Washington reportedly told Nexperia it would need to fire its Chinese CEO to avoid getting added to the U.S. sanctions list. Wingtech, led by Chairman Zhang Xuezheng, was already added to the U.S. Entity List in 2024, a move that restricts American firms from doing business with it.

The decision to take over Nexperia shocked the global auto industry. The company is a key supplier of semiconductors used in vehicles built by Volkswagen and other manufacturers. A Bloomberg report cited unnamed auto executives warning that chip shortages could start disrupting supply chains within a week. They estimated that the impact would ripple through the entire sector in less than three weeks if the standoff continues.

China’s Commerce Minister called the Dutch action one that has “seriously affected” global supply chain stability.Dutch authorities responded by saying they’re staying in contact with Beijing to work “toward a constructive solution.”But behind the scenes, pressure is rising.

The European Union’s trade commissioner Maros Sefcovic said on Tuesday that both countries are “in frequent contact” and “fully aware the time is of the essence here.” He made the statement after a video call with his Chinese counterpart at the European Parliament in Strasbourg.

Nexperia raised red flags before the takeover

European auto giants claim they were blindsided by the action against Nexperia, but legal filings show red flags were raised in late 2023.

Executives at the company had contacted the Dutch economic ministry over fears that its ownership structure, being tied to Wingtech since 2019, could pose a regulatory risk. At that point, Dutch officials already considered Nexperia a Chinese-controlled entity.

Multiple meetings took place between the Dutch government and Nexperia management. The two sides agreed on governance reforms, including the creation of a supervisory board.

Nexperia also offered to add a Western minority shareholder to ease national security fears. Those talks were still in progress when the U.S. dropped its sanctions hammer on Wingtech, throwing a wrench in any possible compromise.

Now, Wingtech is stuck in limbo. The company said it will keep pushing to restore full control of Nexperia, but admitted the situation could drag well into 2026. Despite having diversified chip products and strong quarterly demand, the fight over Nexperia’s future is overshadowing everything else.

Meanwhile, China responded with new restrictions on the export of rare earths and other critical materials. When asked about it, Chinese Commerce Ministry spokesperson Wang Wentao said the move was a “normal” effort to tighten its export control system. He added that China is still allowing approvals for EU companies.

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