There are several reasons puppy mills are considered unethical. First, there are thousands of dogs being dumped in animal shelters every day and it seems unethical to breed more dogs while many are being killed because people are buying puppies from puppy mills rather than adopting from shelters.
Next, many puppy mills, being for profit, badly mistreat dogs. Unlike shelters, they do not neuter their dogs, contributing to dog overpopulation.
Another issue is that many popular breeds are fundamentally unhealthy. Especially in the quest to make a profit selling miniature dogs and show dogs, people are deliberately breeding animals with congenital defects that are much less healthy than non-purebred dogs.