Stay ahead in the evolving world of global tech supply chains. Discover actionable strategies for managing regulatory risks in AI, semiconductors, and quantum computing. Learn how to future-proof your business against shifting policies and strengthen your supply chain resilience for 2025 and beyond.
Unlock expert insights-explore the full article now to equip your business with proven strategies for adapting to global tech supply chain disruptions and regulatory changes.
Table of Contents
- Recommendation
- Take-Aways
- Summary
- Global competition and security concerns put advanced technology supply chains at risk.
- Geopolitical tensions and security issues could threaten open-source software.
- Quantum computing may amplify security risks.
- Companies can turn to several strategic options to prepare for regulatory change.
- About the Authors
Recommendation
Governments are increasingly regulating sensitive, multi-use artificial intelligence (AI) technologies for security and economic reasons. As Raj Varadarajan, Gary Wang, Michael McAdoo, and Marc Gilbert write for the Boston Consulting Group, companies that procure sensitive tech through global supply chains seem likely to face new regulations. These BCG analysts reported in 2023 that firms in AI, semiconductors, biotech, quantum computing, and such should be alert to the risk of regulatory changes. Subsequent events confirm their precautions.
Take-Aways
- Global competition and security concerns put advanced technology supply chains at risk.
- Geopolitical tensions and security issues could threaten open-source software.
- Quantum computing may amplify security risks.
- Companies can turn to several strategic options to prepare for regulatory change.
Summary
Global competition and security concerns put advanced technology supply chains at risk.
Some of the world’s largest economies and political powers, including the United States, China, and the European Union (EU), are regulating their high-tech exports to protect their security and assert a competitive economic advantage. These regulatory policies may affect companies that rely on global supply chains to obtain the technologies, such as advanced semiconductors and AI, they need for commercial and military purposes.
“Companies that plan for foreseeable changes — by understanding risk exposure to suppliers and proactively building scenarios and contingency plans — stand to reap competitive benefits.”
In 2022, the US adopted regulations that limit Chinese companies’ access to high-end American AI designs and chips. Also in 2022, China’s President Xi Jinping announced plans to advance China’s semiconductor industry and to push forward in AI, biotechnology, and clean energy. The EU plans to pass legislation to increase the global market position of its semiconductor industry by a little less than 25%. More than $30 billion in combined private and public financing will support this project.
Geopolitical tensions and security issues could threaten open-source software.
Open-source software has promoted innovation in the technology industry. Anyone can obtain a variety of AI systems and algorithms created through open-source software. For example, data scientists around the world can develop AI models using TensorFlow, which a US firm created. They can do the same with Volcano, which a Chinese firm and several American companies built. AI systems are by nature multi-use. For instance, the military could apply an algorithm that also handles quality control in manufacturing.
“Geopolitical competition and national-security concerns may threaten the “openness” of open source.”
Governments may eventually restrict access to open-source code. In 2019, the US government forbade a prominent American open-source software provider from working with sanctioned nations such as Iran and Syria. In the current environment, more restrictions along those lines could be imposed or expanded.
Quantum computing may amplify security risks.
Quantum computing may spark another technological and commercial revolution. It may be capable of solving problems in such areas as pharmaceutical development that ordinary information-processing methods can’t handle. Quantum computing could add more than $450 billion in value to the global economy in the coming years.
Quantum computing may also prove capable of penetrating the “cryptography defenses” that govern today’s security technologies. Thus, it raises major security risks, which makes countries more likely to regulate attempts to export it.
Companies can turn to several strategic options to prepare for regulatory change.
Technology company executives should understand that the public policies that affect their supply chain options can change quickly and force reactive changes in their business.
“While the semiconductor sector has been the most prominent industry affected thus far, the scope and scale of supply-chain unwinding and rebuilding will soon spread.”
To prepare for supply line changes in advance, technology company leaders should:
- Understand your supply chain – This includes your “suppliers’ suppliers.”
- Invest in analytical tools – You need to be able to find and mitigate your supply chains’ weak points.
- Anticipate and prepare for policy changes – Regulations that may affect your company may also offer opportunities to expand your manufacturing capacity and cultivate new supply chains.
- Nurture your employees – In the tech industry, talent has traditionally flowed freely from one country to another, but that seems likely to end. American laws governing the trade in semiconductors with China prohibit US citizens or permanent residents from working with Chinese companies.
The day is approaching when today’s global research and development partnerships will need to adapt and might not be able to continue working in their current form.
About the Authors
Raj Varadarajan is a managing director and senior partner at Boston Consulting Group (BCG), where Gary Wang is a former project leader, Michael McAdoo is a partner and director of Global Trade and Investment, and Marc Gilbert is a managing director and senior partner.