Semi-conductors are widely used in the technology sector and demand globally is soaring. It's therefore important to look at what they are made of, and Stewart Investors has done just that.
This article does not constitute investment advice. If you are unsure whether an investment is suitable for your circumstances, you should contact an independent financial advisor.
According to investigations and reports in the media, money made from mining for the minerals used in semiconductors could be financing weapons for warfare between armies and rebels, notably in parts of Africa.
Semi-conductors are widely used in the technology sector and demand globally is soaring. It's therefore important to look at what they are made of, and Stewart Investors has done just that.
Stewart Investors, one of the asset managers on The Big Exchange (TBE), are the leaders of an important advocacy initiative which is trying to improve the lack of transparency in the supply chain. This involves raising awareness of the issues surrounding conflict minerals and putting pressure on companies to ensure they are sourcing their raw materials responsibly.
Conflict minerals usually refer to tin, tantalum, tungsten, and gold (3TG) which are mined in regions where the activity contributes to conflict, exploitation, and human rights abuses. Several others, notably cobalt, are subject to the same concerns.
These minerals are essential components of the semi-conductors used in everything from electronic devices to green technologies for a lower carbon future. For example, an electric car requires 2-3 times as many semiconductors as a traditional ICE (Internal Combustion Engine) vehicle.1 These tiny chips are also key to advances in healthcare and artificial intelligence.
Protesters staged a demonstration outside an Apple store in London accusing the company of being complicit in genocide in the Democratic Republic of Congo (DRC) because of the origin of some components it uses. The government of DRC contended that Apple has used illegally exported minerals from the war-ravaged east of the country.2
Clearly this is an emotive issue but tracking minerals throughout the supply chain is very difficult because the ‘illegitimate’ gets mixed with ‘legitimate’. Essentially, everything tends to end up in one big pot for processing by smelters and refiners and a large proportion of this capacity is owned by Chinese companies which may publish limited information. In fact, the Stewart Investors team considers Apple, along with Intel, to be among the leaders when it comes to transparency. Apple’s conflict minerals report provides a lot of information for those wanting more clarification.3
Why then do companies still source from Africa when Canada and Australia also have deposits of these minerals? Stewart’s senior analyst Chris McGoldrick explains that the grade quality of African mines is higher and extraction costs lower, therefore other stakeholders in projects may not take the same long-term view as responsible investors, instead focusing on short-term profitability or bonuses.
It should also be appreciated that whilst there are humanitarian concerns, it is not always an issue of forced labour in the DRC. Mining may be the best paid, or the only, work available to support a family in areas with few alternative jobs. It can be argued that rather than trying to shut down all mines it may in some cases make sense to find ways to improve working conditions and ensure they are implemented.
This is a trade body for the minerals and electronic industries which aims to facilitate responsible sourcing by addressing issues in supply chains.4 Previously investors were barred from joining, and even attending meetings was discouraged, but lobbying of its members by Stewart Investors led to them becoming the inaugural member of RMI’s Investor Network earlier this year and they are working to bring others on board.
The Stewart team have addressed the RMI on how patient (or long-term) capital provided by shareholders can encourage positive forces for change. Despite initial scepticism, many companies belonging to the RMI have become more willing to engage with investors, with one such example being Microsoft.
Stewart investors have written to listed companies affected by these issues, with the backing of over 160 signatories from the asset management industry. Searching questions were asked, and the quality of responses received allows the researchers to rank the companies as leaders and laggards.
In general, it was found that American firms are doing a good job of tracking the supply chain due to stricter legal requirements imposed by the SEC (Securities and Exchange Commission) on companies to publicly disclose their use of conflict minerals. Stewart have hired a consultant to produce an engagement road map of what to prioritise, and a feedback letter is provided to fellow investors twice a year.
TMSC (Taiwan Semiconductor Manufacturing Company) was the first company Stewart Investors engaged with on conflict minerals. They looked right along its supply chain and found that disclosure forms mandated by US legislation had not been implemented (many of its customers are American companies). TSMC is a huge company of which Stewart holds a small percentage of the shares so bringing together other asset managers as a collective voice was beneficial in helping to get in front of senior representatives of TMSC and discuss exclusively this topic.
Stewart Investors also engaged with MediaTek (another Taiwanese semi-conductor business) which is not a member of the RMI although the firm does require their suppliers to provide a “conflict-free guarantee”.5 Stewart noted from their initial conversation with the company that it was apparent they had limited knowledge about the issues surrounding conflict minerals and had never been asked about it before by investors.
The Stewart team have found this to be typical of firms based in Asia where semiconductor manufacturing is centred. They are all cognisant of climate risk, but conflict minerals are not yet recognized as a mainstream issue, so Stewart hope to bring it to their attention and encourage greater transparency.
You can find more details about the work Stewart Investors are doing on Conflict Minerals on their own website here.
Footnotes:
3 https://s203.q4cdn.com/367071867/files/doc_downloads/2025/04/Apple-Conflict-Minerals-Report.pdf
4 https://www.responsiblemineralsinitiative.org/
5 https://corp.mediatek.com/about/sustainability/environmental-management/supply-chain-management
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This communication does not constitute investment advice. If you are unsure whether an investment is suitable for your circumstances, you should contact an independent financial advisor.
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