AMSTERDAM (Reuters) – The Netherlands decided to take control of chipmaker Nexperia in September amid concerns that its former chief executive was already dismantling the company’s European operations and moving production to China, four The Hague sources familiar with the Dutch government’s thinking said on Monday.

A monthlong standoff between China and the Netherlands over Nexperia has prompted carmakers in Europe, the US and Japan to warn of possible production problems due to chip shortages. Although the chips produced by Nexperia are very basic, they are used heavily in automotive electronic systems.

Sources in The Hague said that Zhang Xuezheng, the former CEO of Nexperia and the founder of Wingtech Technology, the Chinese parent company of Nexperia, had planned to cut 40% of the workforce in Europe and close a research and development facility in Munich.

They said that before Zhang was suspended as CEO by a Dutch court on Oct. 1, he had transferred secrets, including chip designs and machine setups, from the company’s factory in Manchester, England, to a Wingtech factory in China. They added that physical equipment will next be removed from the company’s Hamburg production plant.

Zhang could not immediately be reached for comment.

The Dutch government took control of Nexperia on September 30, citing governance failures. On October 4, China’s Ministry of Commerce banned the company’s products from being exported to China. While most of Nexperia’s chips are produced in Europe, about 70% are packaged in China before distribution.

The company’s Chinese subsidiary has taken steps to become independent and has resumed sales to domestic customers in China.

Sources said the Dutch government is confident it can negotiate a solution with China that would return the company to a unified Dutch-Chinese structure.

(Reporting by Toby Sterling; Editing by Rosalba O’Brien)