Once again, the topic of counterfeiting has struck a nerve with many of our readers after reading part 2 to the Semiconductor Insights article on counterfeit parts, Counterfeit parts Part 2 -- Baiting the trap. The risk of buying counterfeit parts is certainly not a new problem for the electronics industry. While the scapegoat in many cases is the independent channel, don't group together unscrupulous parts brokers with the many reputable independents that are always on the watch for counterfeit parts.
There are plenty of reasons why OEMs unknowingly buy bogus parts. So what can you do? The best advice I've heard is to buy from reputable suppliers and make sure you're able to trace the parts. Unfortunately, that may not always be possible, and therein lies the problem.
Check out part 1, Under the Hood Special Report: Counterfeit parts, legitimate woes, then take a look at what some readers had to say on the topic.
To the editor:
I saw this piece today and think you did a nice job of outlining one of many potential "process leaks" that can lead to sub-standard products entering the supply chain. As CEO of the largest "independent" supply chain participant that you speak about, I see these types of situations every day, in every geography that we operate. As an active board member of the Independent Distributors of Electronics Association ( www.idofea.org), we work hard to develop best practices and standards (reference the 1010 Standard) to help our members put in place processes and procedures to safeguard their supply chains. I can say with surety that in both areas, as a result of strong vendor relationships, proper governance models, and stringent supply chain practices, we have insulated ourselves and our customers.
Your last paragraph resonated the loudest. That is, (1) there is no easy answer, (2) all legitimate supply chain participants can be victims if they do not adopt a pro-active protection methodology, and (3) it is up to "us" to find solutions to a tough problem. Only through a cohesive and sustained effort in vendor management and process control will we be able to stem the tide in this area.
Just my 2 cents....once again, nice piece.
Frank Cavallaro, Chief executive officer, Converge (Peabody, Mass.)
To the editor:
I enjoyed reading the second edition of the Semiconductor article. The article painted a very good presentation of real realities the whole electronics chain is facing. We are probably one of the top 15 independent distributors in the United States and have been in business since 1995. We work with the major CMs and many leading OEMs every day sourcing solutions to the issues you describe. We do see it and have been burned in the past, present, and will be in the future, but many processes and procedures have helped us lessen the impact. Rarely out of China will we get burned, but sometimes from companies that sell in the U.S. and misrepresent where they are getting their stock from. At least we can get our money back.
There is a big difference between brokers and independent distributors (some not so independent and that have franchise lines). Brokers are what you described. Independent distributors carry stock; have warehouses; shipping, AP and AR departments; and can be ISO certified (We will be in November.). Most will offer many value-added services. One goal of a good independent distributor is to buffer their customers from the realities of the world out there, including China. If you go online on NetComponents, or Google, you will find hundreds of suppliers. There is no safety net if you go at it alone. If you align yourself with a good supplier, you will decrease your likelihood of getting burned dramatically. The advent of "Open To The Public" sites such as NetComponents have exacerbated the problem and it is "Buyer Beware" when they go it alone, or just use a broker.
Independent distributors provide much greater value then what you described by going into the open market. Often an independent will source product from other distributors in the U.S., Europe, and Asia and will work direct with the factory. Often franchise distributors look at a computer screen and say "sorry, nothing I can do for you . . . lead time is XX weeks", or don't have stock. An independent will look at cross options from many leading Tier 2 and 3 manufactures when the big guys do not have stock, or EOL a product. A franchise distributor will not usually cross out one of their Tier 1 suppliers with one of their Tier 2 or 3 suppliers. Good independent distributors use independent testing labs to verify accuracy of parts sourced from overseas.
If you want a first hand view of how companies can effectively mitigate these issues, we would love to meet with you here in Atlanta; give you a tour of our facilities, and answer any questions you have.
I've had the privilege of working for an OEM, one of the "A" franchise distributors in Silicon Valley, and now work for an independent. I guess you could say I've worked for "The Good, The Bad, and The Ugly".
Daniel E. McMillen, director of business development, World Micro, Inc. (Atlanta, Ga.)
To the editor:
One other situation that counterfeit parts can land on the unsuspecting is just a result of shopping for the best price. Avnet/Arrow/Future/etc. don't always give the best price around, so for 'the little guy' doing some shopping with brokers can often yield (significantly) better pricing. Occasionally though, those prices are just "pass through" from a better deal they found, which may or may not be legit!
While we've only had a couple cases of counterfeit parts through brokers, we've had more than a few cases of getting house numbered "equivalent" parts or even returned product. (Reels of NOR flash that were "new, unprogrammed", yet already programmed with someone else's code, etc.)
It doesn't help much either when the "big guys" (Avnet/Arrow/Future/etc.) often have pricing that varies wildly between each other. When flash prices between, say, Future and Avnet can vary by 50% for the same item it makes it tough to tell if that brokered part for 40% cheaper is a good deal or a disaster in the making.
Another issue that makes brokers "go to guys" by default for smaller operations is that often times you can get parts from them in more flexible quantities than the larger distributors. For example, if a distributor has a 2500-piece minimum reel quantity (maybe with NCNR on the part even!) and you only need about 500 pieces it can be advantageous to pay a little more per part to brokers for the ability to take a smaller quantity. Of course, the higher priced components that you might want to get in those smaller quantities are also often the most tempting targets (RAMs, Flash, CPUs, etc.) for the sellers to counterfeit/remark/refurbish.
Clay Cowgill, owner/engineer, Embedded Engineering, LLC (Vancouver, Wash.)