SAN FRANCISCO—The five most prevalent types of semiconductors reported as counterfeits represent $169 billion in potential risk per year for the global electronics supply chain, according to market research firm IHS iSuppli.
The five most commonly counterfeited semiconductor types are analog integrated circuits (ICs), microprocessors, memory ICs, programmable logic devices and transistors, all of which are commonly used in commercial and military applications, according to data provided by IHS. Together, these five component commodity groups accounted for slightly more than two-thirds of all counterfeit incidents reported in 2011, IHS said.
The sum total of the application markets where these five most reported commodity groups are used represented $169 billion worth of semiconductor revenue in 2011, according to data derived from the IHS's application market forecast tool. These commodities are used widely throughout all major semiconductor applications.
“There has been a great deal of focus on the issue of counterfeit parts in the defense industry, but the majority of reported counterfeit incidents are for commercial components which have broad use across both military and commercial applications,” said Rory King, director of supply chain product marketing at IHS, in a statement.
King said that one of every four counterfeit parts reported is an analog IC, a component that is used in everything from industrial and automotive products to wireless devices, computers and consumer electronics."A single counterfeit could impact end products in any of these markets and the potential problem is pervasive, amounting to billions of dollars of global product revenue subject to risk," King said.
The total global analog IC market was worth $47.7 billion in 2011, according to IHS. The consumer electronics segment in 2011 consumed $9.8 billion worth of analog ICs, or 21 percent of the global market, IHS said. Automotive electronics amounted to $8 billion, or 17 percent; computing represented $6.7 billion, or 14 percent; industrial electronics was at $6.5 billion, or 14 percent; and wired communications was $2.9 billion, or 6 percent, according to IHS data.
"A faulty counterfeit analog IC can cause problems ranging from a mundane dropped phone call to a serious tragedy in the aviation, medical, military, nuclear or automotive areas," King said. The excessive cost of rework, repair and customer returns for component failures is significant, he said. "For the global electronics supply chain, tackling the problem of counterfeit and fraudulent components has become an issue of paramount importance," King said.
IHS said in February that 2011 was a record year for counterfeit reporting. Incidents of counterfeit parts have tripled during the past two years, according to the firm. Counterfeit parts often are cheap substitutes or salvaged waste components that fail to meet quality requirements, leading to potential failures, IHS said.
While the top five most counterfeit or fraudulent parts represent a major portion of the counterfeit problem, other types of devices also are vulnerable to counterfeiting and fraud, IHS said. In all, IHS has data for more than 100 types of integrated circuits, passive components, electro-mechanical devices and other parts with counterfeit incidents reported against them, the firm said.
"The industrial segment, which includes both military and aerospace devices as well as medical components, is a relatively minor consumer of the most prevalent parts that are counterfeited," King said. "However, a failure of a substandard counterfeit component in this area can have catastrophic consequences."
King said organizations can use the reports of counterfeit incidents reported by others to be alerted of problematic parts in circulation throughout the supply chain.
Frank, I have to disagree with you TOTALLY here. The solution to problems like this is NOT to study them to death. One must first get to the cause and ELIMINATE the cause by some means. The number of these parts that are making it to circuit boards through manufacturer authorized distribution channels in "Western" countries is at present almost nil. As much as I disagree with Deming on many things, I agree with him that testing in quality is a tail-chase.
I would suggest that IC manufacturers provide a cradle to grave tracking system for their components. Any IC manufacturer that doesn't would not be "trusted" by board houses. There would be cost involved but given the potential liability and rework costs it might be well worth it.
Although I'm sure the problem is very real, your assessment of "potential" is a good illustration of extrapolation in action. By your logic, I could say that potentially $165B in automobiles were counterfeit as well, since that is the size of the U.S. market.
Good reporting should require that you put a realistic upper bound on monetary claims, and not just shout that the entire sky is falling.
Karen- I'll defer to Bill Schweber's answer down below.
I would also point out: these are pretty broad product categories. Between the top five categories, you've got the bulk of chip types. I suspect it would be useful to see a more detailed breakdown, but perhaps IHS iSuppli reserves that kind of information for those who pay for their report.
My company - Tiger's Lair - has a solution to prevent counterfeiting of new digital ICs based on modifying their design. A chip produced from a protected design will not work unless it is unlocked in a secure environment. This makes both reverse engineering and overproduction useless since the resulting chips will not be operational.
We are looking for partners interested in exploring this solution.
Oh, and there should be a place to expose every user of fakes. EEtimes can play a role. Let a dedicated editor receive my fakes report along with a copy of their invoice. It'll take some investment from EEtimes, but it will be made up by adds from companies who are able to deliver clean components directly to the assembly floors.
I recently received a product with a faulty LDO. The solution was to buy parts from European distributors and ship them to China myself.
In my opinion the distributors can play a large role. The stolen night-shift fallouts typically don't make it to approved distributors. So part of the process of selecting a subcontractor should be that they use verified distributors and show me the shipping documents for the parts on my BOM.
There is business to be made for DigiKey and others in sending the parts on my BOM to China and mark the rolls only with my item numbers. Shipping CDP to China is something no Western company is happy to do. But if they could sell such a service as an insurance policy, I'd happily buy.
There is some movement toward addressing the twin problem RWatkins identifies. Most optoelectronics manufacturing has moved offshore since the comms industry bust of the early aughts. A member of the U.S.-China Economic and Security Review Commission recently announced plans to create a "trusted" manufacturing facility for optoelectronic components near Dayton, Ohio, and Wright-Patterson Air Force Base. The military is concerned about fake parts as well as erosion of the U.S. industrial base. More "trusted" manufacturing plants is one way to tackle the counterfeit problem. Undoubtedly, other approaches will emerge as the problem gets worse.
January 2016 Cartoon Caption ContestBob's punishment for missing his deadline was to be tied to his chair tantalizingly close to a disconnected cable, with one hand superglued to his desk and another to his chin, while the pages from his wall calendar were slowly torn away.122 comments