Law, Ethics, and Power in the Global Chip Race

Global Semiconductor Demand and the Geopolitics of Production

Chips power the world. They are the fundamental building blocks of modern society, powering not only our devices but also cars, washing machines, data centers, artificial intelligence, clean energy, and other essential technologies. The complexity of these chips is due to their highly specialized manufacturing process. Produced over the span of three months, a single chip, approximately the size of a fingernail, is created in a strict production environment composed of dust-free rooms equipped with multi-million-dollar machinery. These controlled environments are termed the “cleanest rooms on earth”, as even a speck of dust that comes in contact with a chip can turn it ineffective. Due to these stringent conditions necessary for their creation and their highly advanced technological equipment, chips have become one of the most valuable commodities on earth. However, this global reliance on chips has sparked concerns driven by rising geopolitical tensions and a growing neglect of ethical considerations.

China and Taiwan hold the largest manufacturing capacities, while Southeast Asia has become specialized in the assembly, testing, and packaging (ATP) segment. The Taiwan Semiconductor Manufacturing Company (TSMC) produces nine out of every ten of the world’s most sophisticated semiconductors in addition to 60% of the world’s global chips. Furthermore, the global expansion of artificial intelligence has driven a substantial increase in demand for semiconductor chips. These demands have made the semiconductor market expected to experience a growth rate of approximately 15% from 2024 to 2032. Being a key player in the production of the world’s semiconductor chips and a major supplier to industries such as Apple and Samsung, Taiwan plays a vital role in supporting the United States semiconductor sector. However, this reliance raises serious security concerns and heightens geopolitical tensions, especially as China emerges as a global competitor.

CHIP and Science Act & European Chip Act

No single nation possesses the capacity to command the entire semiconductor supply chain. Each region holds distinct strategic advantages: Asian economies dominate large-scale manufacturing, the United States leads in advanced chip design and innovation, and Europe specializes in the development of the sophisticated machinery essential for fabrication. However, compared to their Asian counterparts, the US is largely behind in its current manufacturing capabilities, producing only about 10 percent of the world's semiconductors.

The US’s growing security concerns due to over-reliance on Taiwan's manufacturing capacities led to the creation of the CHIPS and Science Act under the Biden Administration in 2022. In addition to limiting overdependence on Taiwan, this Act was largely created in opposition to growing fears that China’s power could threaten Taiwan and its global supply chain. As part of the Act, $52 billion in incentives and subsidies was allocated, with $39 billion spent on manufacturing and $13.2 billion on research and development initiatives. These investments were a part of the US’s goals to strengthen its domestic semiconductor facilities, drive innovation through research and development, and accelerate the economy through new jobs.

Following the US CHIPS and Science Act, the EU launched the European Chip Act in 2022 to boost its own capabilities in response to the rising global chip demand. The EU recognized the shortages in its current semiconductor facilities as well as its limitations in growth due to the aftermath of the pandemic. As part of the Act, the EU aimed to double its original contribution of 10% of the global market share of semiconductor production to 20%. The EU implemented similar tactics to the US such as strengthening domestic chip manufacturing and research and development sectors to achieve this benchmark. However, their goals were designated into three primary pillars: first, to support building innovative technology. Secondly, to pour a large-scale investment of 43 billion euros into these efforts. And finally, to respond swiftly to supply chain shortages.

Environmental and Human Right Concerns

These efforts to strengthen national security and advance technological capabilities have also raised ethical concerns regarding their environmental and human rights impacts. The creation of semiconductors consists of complex stages that can be summarized into three primary steps: designing, manufacturing, and assembly testing and packaging (ATP). These processes are highly resource-intensive, relying on large volumes of water, electricity, and hazardous chemicals that contribute to both carbon emissions and waste generation. However, direct environmental effects from pollution are also a significant issue, causing serious public health and safety concerns. This is largely due to hazardous waste, including unused PFAS chemicals and slurries from processes like chemical mechanical polishing, which can be released into the environment and potentially expose workers to a range of harmful substances.

With a prioritization of technological growth, pollution and improper waste management practices can often go unnoticed. These issues are met with a lack of substantial data reported from semiconductor industries, as well as limited global standardization practices in front and back-end procedures for chip manufacturing. From a climate change standpoint, this makes scope 3 greenhouse emissions — meaning the indirect release of greenhouse gases across third-party activities and throughout the entire life cycle of the chip — particularly difficult to quantify. However, in addition to greenhouse gas emissions, greater transparency of the direct effects of environmental and chemical pollution is needed.

Taiwan Semiconductor Manufacturing Company (TSMC) however, states that it is committed to upholding human rights and protecting its workers from safety violations. They asserted that they follow the OECD Due Diligence Guidance for Responsible Business Conduct, United Nations Guiding Principles on Business and Human Rights (UNGPs), and RBA Code of Conduct with a "commitment to upholding international human rights standards and norms, while complying with local laws in all operating locations.”

However, according to a 2023 report by the World Benchmarking Alliance, TSMC lacked in its human rights index, reporting their total score was 8.5 out of 20. The scores by measurement area are as follows: respect human rights, 6.0 out of 10; provide and promote decent work, 2.0 out of 6; and act ethically, 0.5 out of 4. Reports on unethical working conditions have emerged particularly from the TSMC plant in Arizona, which was opened as part of the company's efforts to expand semiconductor manufacturing capabilities outside of Asia.  In the United States District Court for the Northern District of California, San Jose Division a class action lawsuit was released alleging employee discrimination and hostile work environment claims. Media and court filings suggest the plaintiffs present detailed accounts of alleged mistreatment, differential treatment between employees of Taiwanese and U.S. origin, and concerns over safety at the Arizona facility. Furthermore, the situation has raised growing concern about workplace culture and compliance with U.S. labor standards at TSMC’s Arizona operations. Technological success shouldn't be at the cost of unethical working conditions. But in a rising technological world, these complex intersections of ethics, law, and power remain more relevant than ever.

Image by Jon Sullivan via Wikimedia Commons