Modeling competitive semiconductor supply chains under disruptions: a multicountry two-stage stochastic framework

Purpose This study aims to develop a two-stage stochastic framework that guides governments and firms on where and how much semiconductor production capacity to add, and how to procure chips when large-scale supply disruptions are possible. Design/methodology/approach The authors model countries as players in a two-stage stochastic logistics network game: in Stage 1, they choose capacity investments under budget limits; and in Stage 2, once a disruption unfolds, they optimize procurement under costs, export quotas and shortage penalties. The problem is formulated as a stochastic generalized Nash equilibrium and numerical examples are solved with a variational inequality projection algorithm. Findings Investing in domestic production and neutral manufacturing hubs can cut expected shortage penalties significantly. Limited export windows ease system-wide shortages. Technological capability, rather than budget size, is the primary driver of where new capacity locates. When shortage penalties are high, domestic production expansion comes first; after that, access to neutral hubs deliver the best penalty relief. Practical implications The model operates as a “what-if” stress-test, enabling policymakers, fab operators and downstream manufacturers to compare investment strategies and export control rules before committing capital or negotiating trade terms. Originality/value To the best of the authors’ knowledge, this is the first study to integrate stochastic logistics network design with game-theoretic competition in the semiconductor sector. This work provides a tractable equilibrium algorithm and actionable insights for building resilient semiconductor supply chain networks.