Reaction Isn’t Enough. Nexperia Case Shows We Must Pre-empt China’s Tech Grabs
As the breadth and depth of China’s industrial strategy has become clearer, democracies need to adopt systemic and preventive approaches to economic security, as opposed to current reactive case-by-case interventions.
How can this be done?
Most countries already have foreign investment and acquisition review panels. These bodies typically rely on self-notification by affected entities. While this works in many cases, China’s deliberately opaque and diffuse tactics demand righter oversight and a re-examination of past deals.
Governments also should signal what ‘critical’ means in the context of critical technologies and explain the implications for foreign partnerships, acquisitions and investments. These assessments should also consider their effect on global competitiveness.
ASPI’s Critical Technology Tracker identifies 57 out of 64 areas where China holds a dominant global knowledge position, spanning defence, space, energy, advanced materials and key quantum technology areas. Allowing Beijing to further consolidate these sectors would undermine our collective strategic competitiveness.
Finally, authorities should confront China’s strategic economic and technological programs more strongly. Given the explicit goal of Little Giants to achieve technological self-sufficiency and create dependencies, companies in the program should be prohibited from gaining ownership, control or influence over critical technology assets. This would apply to more than 16,000 small and medium Chinese technology enterprises.
In semiconductors, Australia has a small but promising footprint. Companies such as Silanna and Morse Micro design world-class components. Silanna even operates Australia’s only chip fabrication facility, in Brisbane. Yet, these firms, too, depend on overseas supply chains and manufacturing plants.
Canberra has shown it can act when necessary, blocking the proposed sale of electricity distributor Ausgrid to Chinese bidders in 2016 and excluding Chinese suppliers from bidding for telecommunications network infrastructure in 2018. Reinforcement of the powers of the Foreign Investment Review Board in 2021, through the addition of a national security test, and 2024 amendments to the Security of Critical Infrastructure Act, allowing for ‘government assistance’ directions during crises, added further important safeguards. But such measures are reactive.
The Nexperia saga is not an isolated incident; it’s a symptom of a broader shift. The real economic security risk is the quiet erosion of access to essential, unglamorous parts that keep industries running. Economic security in open, market-oriented democracies requires an anticipatory approach grounded in foresight.
For Australia, the imperative is clear too: align investment screening, supply chain continuity and contingency planning with a deeper understanding of the direction of China’s techno-industrial complex. The Netherlands’ effort to defend its sovereignty has, paradoxically, exposed its dependence. Nexperia joins a growing list of examples showing liberal democracies have been too complacent in dealing with China.
Fitriani is a senior analyst in ASPI’s Cyber, Technology and Security program. Bart Hogeveen is a senior fellow and director Europe for ASPI. This article is published courtesy of the Australian Strategic Policy Institute (ASPI).
