How power rivalry is reshaping semiconductor supply chains

Global supply chains have long been built for efficiency and cost. But in strategic industries, the challenge today is as much political as it is logistical. A new study from the House of Innovation at the Stockholm School of Economics shows how growing rivalry between major powers is pushing firms to rethink where they source materials, place factories and build long-term partnerships.

The study focuses on semiconductors and rare earth elements — two industries that are critical for modern technologies such as electric vehicles, renewable energy and advanced electronics. Both sectors have become focal points in the strategic competition between the United States and China.

“What we see is a clear shift in how companies think about supply chains,” said Constantin Blome, co-author of the study and professor at the Stockholm School of Economics. “Geopolitical considerations are no longer a side issue — they increasingly shape decisions that used to be driven mainly by cost and efficiency, making supply chain design a strategic issue rather than just an operational one.”

From efficiency to resilience

Based on interviews with senior managers in high-technology firms operating in the US and China, the research shows a clear shift in how companies respond to political uncertainty. Policies such as export controls, subsidies and localisation requirements have increased uncertainty, making long-term planning more difficult.

Rather than treating new regulations as short-term disruptions, firms increasingly adjust long-term decisions about sourcing, production capacity and supplier relationships. This includes diversifying suppliers, reducing dependence on single countries for critical inputs and, in some cases, relocating or duplicating production to different regions. These changes are often costly, but firms see them as necessary to maintain access to key technologies under uncertain political conditions.

“Firms are not just complying with new regulations,” said Łukasz Bednarski, co-author and postdoc fellow at the Center for Security and Resilience at SSE. “They are re-engineering supply chains to make them more resilient, even if that comes at higher short-term costs.”

What this means for businesses and policymakers

The findings highlight a broader shift in global business. Supply chain strategy is no longer just an operational issue — it is tightly linked to national security and industrial policy. For companies, this means integrating geopolitical risk into long-term investment decisions. For policymakers, it underlines how industrial and trade policies directly influence corporate behaviour.

The study also suggests that these changes are likely to persist. As strategic competition continues, companies in critical industries may increasingly operate in parallel supply chain systems, aligned with different geopolitical blocs.

As a result, supply chains in strategic industries are becoming less globally integrated and more politically segmented. The study suggests that companies may increasingly operate parallel supply chain structures aligned with different geopolitical blocs — a shift with long-term consequences for global trade and competition.

This is a modified version of a news item published by the Stockholm School of Economics. The original version of the news item can be accessed here.

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