Export Controls and Strategic Adaptation in AI-Enabling Supply Chains

Semiconductor and AI-enabling supply chains face unprecedented disruption from export-control regimes such as the U.S. CHIPS and Science Act. While these policies are intended to safeguard national security, they can also fragment global supply chains and accelerate technological advancement in rival nations. This study develops a quadripartite gametheoretic model involving a regulator, a key technology supplier, a regulated firm, and a rival nation to explore how fines, sanctions, and technological capability influence strategic behavior across six geopolitical regulatory regimes. The results show that export controls are most effective not when penalties are maximized, but when enforcement is strategically calibrated, supplier-level execution is aligned with regulatory objectives, and regulated firms can comply without undermining economic viability. Excessively stringent regimes increase enforcement and adaptation costs and may accelerate innovation by the rival nation, while overly lenient regimes weaken deterrence and enable persistent circumvention. By conceptualizing export controls as a coordinated governance and execution problem embedded in interdependent global supply chains, this study provides a quantitative framework to support the design of sustainable export-control regimes that balance security, innovation incentives, and supply chain stability. For engineering managers, the findings highlight the importance of compliance-oriented system design, supplier coordination, and strategic adaptation when operating in adversarial, highly regulated supply chain environments.