TI chip, misused?

Texas Instruments (TI) will face a vote on a shareholder resolution seeking information about possible misuse of its products, including Russia’s incursion into Ukraine. The U.S. Securities and Exchange Commission (SEC) refused to grant TI permission to omit the measure at its upcoming annual shareholder meeting.

Specifically, the proposal put forward by Friends Fiduciary Corporation (FFC) would require TI’s board to “commission an independent third-party report… Regarding [the company's] due diligence process to determine whether customer abuse of its products puts the company at “significant risk” of human rights and other issues.

FFC, a Quaker not-for-profit organization that provides investment management services, requires the Board of Directors and management, as appropriate, to include the following information in their reports:

Due diligence process to prevent prohibited users from accessing or performing prohibited uses in conflict-affected and high-risk regions such as Russia
The Board’s role in overseeing risk management in these places
Assess the significant risk to shareholder value posed by misuse of the company’s products
Assess additional policies, practices and governance measures needed to mitigate the identified risks.

Multilateral organisations, states and accounting bodies are taking steps to implement mandatory human rights due diligence in the EU, the FFC said, urging companies to report on human rights and conflict as significant risks.

TI noted that its semiconductor chips are designed to meet a variety of basic functions in everyday products such as dishwashers and cars, and said that “any device that plugs into a wall or has a battery is likely to use at least one TI chip.” The company said it will sell more than 100 billion chips in 2021 and 2022.

TI said that more than 98 percent of the chips shipped in 2022 to most jurisdictions, end users or end-uses did not require a U.S. government license, and the rest were licensed by the U.S. Department of Commerce when required.
The company wrote that ngos and media reports indicate that bad actors continue to find ways to obtain semiconductors and transfer them to Russia. “TI strongly opposes the use of its chips in Russian military equipment, and… Invest significant resources on our own and in partnership with industry and the U.S. government to prevent bad actors from obtaining TI’s chips.” Even advanced weapons systems require common chips to perform basic functions such as managing power, sensing and transmitting data. Ordinary chips can perform the same basic functions in household items such as toys and appliances.

TI highlighted the difficulties faced by its compliance experts and other management in trying to keep its chips out of the wrong hands. It says these include:
Companies that are not authorized distributors buy chips to resell to others
“Chips are everywhere… Any device plugged into a wall or with a battery is likely to use at least one TI chip.”
“Sanctioned countries engage in sophisticated actions to evade export controls. The low cost and small size of many chips exacerbate the problem.
“Despite the foregoing, and the company’s significant investment in its compliance program designed to prevent chips from falling into the hands of bad actors, proponents have sought to interfere with the company’s normal business operations and micromanage this complex effort,” TI wrote.