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Export controls on advanced tech: Managing supply chain risk
- Export controls have expanded significantly to protect US national security and technology leadership in semiconductors and emerging technologies like artificial intelligence. It’s likely they’ll expand further to cover more innovations and entities.
- These controls have disrupted global supply chains, affecting how companies source parts, manufacture components and navigate international markets.
- To succeed, organizations should fully understand these restrictions, maintain compliance and adapt their overall strategy, sourcing and products accordingly.
Export controls continue to be a key instrument of the US government’s efforts to develop and preserve a technological competitive advantage under an expanding national security umbrella. These trade restrictions on advanced technologies have led companies to reassess their end-to-end product life cycles, including a reevaluation of strategic sourcing efforts and procurement decisions, as well as exports of US-origin parts and components for manufacturing and final assembly abroad.
Take, for example, companies that source items from China, such as semiconductors and advanced tech components. Many are now considering a potential pivot to secure alternate suppliers and are actively reducing reliance on longtime partners and regions. This has resulted in manufacturing disruptions, product delays and the need to move production to other countries.
Some companies are also considering their options for fulfilling orders abroad in alignment with shifting regulatory requirements and the evolving use of tariffs as a foreign policy tool. This growing complexity and these recent shifts are impacting organizations with extensive, global value chains, pushing them to adapt business models to mitigate risk and maintain operational efficiency.
Capitalizing on this trend, nations like Mexico, Vietnam and others in Southeast Asia, are emerging as key players in the semiconductor and technology supply chain, stepping in to fill the gap created by tension surrounding US-China trade. These countries offer lower-cost production alternatives while avoiding the regulatory pitfalls that come with dealing directly with China. The United States, too, has authorized funding to incentivize domestic research and manufacturing of semiconductors, via the CHIPS Act.
Affected companies should reevaluate their sourcing approach and invest in infrastructure to navigate these export controls and assess opportunities to onshore efforts. This includes integrating compliance into business strategy, operations and product design.
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