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thiagorulez
Most of these fakes are poorly refurbished products pulled from places like ...
Netteligent
Apple selling its well known apps, musics, videos for less than $5 or much less. ...
Ferreting out the fakes in the chip supply chain
Bruce Rayner
8/15/2011 9:01 AM EDT
The expansion of counterfeiting into the military and aerospace sectors is particularly worrisome. Many of the parts that contractors and government agencies buy are for electronic systems on aging planes, tanks and ships. Redesign is too expensive, so the only option is to purchase decades-old, obsolete parts in the aftermarket. It’s an accident waiting to happen.
Indeed, the obsolete-parts market is particularly appealing to counterfeiters because of the high margins on the hard-to-find components and the anonymity of the gray-market distribution channel.
The gray market comprises unauthorized brokers, traders and distributors that match up buyers and sellers around the world. Most of these middlemen are aboveboard; some are not. Gray-market parts are acquired from a variety of sources, and some market participants neglect to authenticate the parts they buy.
“It’s a national security issue,” said Leon Hamiter, president and founder of Components Technology Institute Inc. (CTI; Huntsville, Ala.). Hamiter’s company has been conducting training workshops for independent distributors, OEMs and EMS companies in the United States and the United Kingdom since 2006, and it provides tools and resources to help clients ferret out counterfeit parts. CTI also offers a certification program for independent distributors (see sidebar).
Numerous counterfeit versions of parts and equipment have already found their way into military and government systems. In a high-profile 2008 case, the Federal Bureau of Investigation reportedly seized $3.5 million of counterfeit Cisco routers and switches that were made in China, illegally shipped and then installed in U.S. government computer networks.
Earlier this year, two Southern California counterfeiters pleaded guilty in a federal case to an elaborate scheme to manufacture and sell counterfeit chips, including to the U.S. Navy. The Navy reportedly was issued a Certificate of Conformance for the chips it bought. Among other things, the indictment accused the counterfeiters of “harvesting” IC dice from scrap electronics and repackaging them to appear new, including adding fake OCM markings indicating the devices were new and authentic components.
According to industry sources, the operation ran for nine months in 2009 and produced 400,000 components, of which more than 200,000 are suspected of still being in the supply chain. The most popular part the pair counterfeited was the Intersil ICM7170 IPG, an obsolete microprocessor compatible real-time clock. They paid 2 cents apiece for the scrap ICs, repackaged them as ICM7170AIPG and resold them for around $38 apiece. The potential gross sales value was $15 million.
Of course, buyers of components—primarily OEMs and EMS companies, but the government as well—share some of the blame for the counterfeiting boom. Procurement staff are often under pressure to buy the lowest-priced components with the shortest lead times, and many companies don’t have adequate controls in place to guard against buying counterfeit parts.
Even component manufacturers and franchised distributors contribute to the problem. Some component makers don’t help customers authenticate obsolete parts purchased from independent distributors. And franchised distributors have been known to accept OEM returns without checking and validating the authenticity of the parts. As a result, franchised distributors unknowingly have sold counterfeit parts; indeed, 21 percent of respondents to last year’s Commerce Department study on military electronics listed franchised distributors as a source of counterfeit goods.
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| Survey of 83 OCMs was conducted in 2009; results shown are for those that reported encountering incidents of counterfeiting. Source:"Defense Industrial Base Assessment: Counterfeit Electronics," U.S. Department of Commerce, 2010 |
While it may not be foolproof, authorized distribution is still the safest bet for minimizing the risk of buying counterfeits. Two organizations provide resources to identify authorized distributors and certified original parts. The Electronic Components Industry Association (ECIA) launched a Web site earlier this year that provides inventory availability from authorized distributors (www.eciaauthorized.com).
And a collaboration between the Semiconductor Industry Association and distributor Rochester Electronics Inc. offers the Authorized Directory (www.authorizeddirectory.com), which lists franchised distributors for more than 230 original semiconductor manufacturers and guarantees the traceability of their products.
Next: Chain reactions
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Cliff Keller
8/15/2011 3:55 PM EDT
I disagree with the tone of this article. It is actually very easy to avoid counterfeit and reused devices. Just buy the devices directly from the supplier or through franchised distributors. The problems come from buying through "gray market" sources to save a little money.
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maryl
8/15/2011 8:09 PM EDT
It is not always a matter of money. Sometimes the "gray market" is the only choice if you are supporting designs that require obsolete components when there are issues redesigning the product to use newer parts. I believe the article mentions this in relation to the military and aerospace industries.
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Etmax
8/15/2011 8:18 PM EDT
I'm sorry Cliff, but the author did cover what you said elaborating on how the parts make their way into the "official" channels. Yes most of it is grey market, but there are exceptions. Consider also that the semi companies now manufacture in china and distribute to the world from there. What makes you think that a country that puts melamine in baby milk resulting in kidney damage won't add a duds to the mix?
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ibm221
8/16/2011 3:32 AM EDT
this is devil, dude, and it's everywhere.
US president could also lie about his everything.
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pdudley
8/19/2011 2:25 PM EDT
That is like Miss America wanting "Peace on Earth" ....it's a real nice thought - but totally unrealistic!
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Zappers
8/16/2011 9:11 AM EDT
It is not only US where counterfeit portable memory chips are sold but all over the world. Memory Chips (especially upgraded ones which are originally 512Mb are sold as 2GB) are sold one third of the price of original 2GB memory Chips. I am almost postive that Asia consumes probably equally or even much more of these counterfeits than USA today!!!
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DrQuine
8/16/2011 10:00 AM EDT
A really effective means to secure the supply chain would have wide application across many industries. The same problem affects the pharmaceutical business where counterfeit pills sometimes manage to cross into the "legitimate" distribution channels.
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Dan.Deisz_#2
8/16/2011 11:03 AM EDT
Buy from Authorized Distributors first and then go to independents if there is no Authorized solution anywhere. Franchised does not mean Authorized necessarily. If buyers consistently want to buy based primarily on price or who they have worked with in the past, regardless if they are authorized, counterfeit will continue to grow. Rochester Electronics has over 500,000 obsolete device types. This obsolete product story along with many other Authorized providers/solutions means most of the obsolete market is covered very well. No excuses not to buy Authorized when that solution is available in my opinion.
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prabhakar_deosthali
8/17/2011 2:48 AM EDT
Buy from the supplier who is ready to take back his supplies if the parts are found to be fake. As long as this guarantee is given by the supplier, you don't have to worry if the supplier is an authorized distributor or an independent one
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Dan.Deisz_#2
8/17/2011 7:32 AM EDT
Except this requires YOU to figure out if you have a problem. You have to take on the burden of proof and risk to your product and schedules. Authorized sources with fully authorized product ensure no counterfeit.
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agk
8/17/2011 3:40 AM EDT
A difficult area to make counterfeits. Once at my work place we found that QC rejected whole lot of elctronic isolators as it was not meeting the production specifications. The samples were brought to us. We could not find any difference in the product when compared with the previous lot. but still they were failing. That was tested stage by stage and we found that an op amp was not performing as it should. Few samples were brought from the stocks in our stores. Examined under magnifier and found to be a fake one. While seeing the purchase records it was supplied by a dealer who is not an authorised for that brand. The part was again purchased from an authorised seller and all the isolators reworked with this part. Then it passed in the QC.
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McGookin
8/24/2011 1:29 PM EDT
I'm tasked with investigating just such situations for the FBI. I would love to receive tips like this at Cory.mcgookin@ic.fbi.gov
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AMPT/OEM-Sales
8/17/2011 10:15 AM EDT
Or partner with a reliable Independent Distributor like Advanced MP Technology which has all of the precautionary measures (laboratory-grade high-powered microscope, an X-ray inspection system, decapping capabilities, strict ISO 9001: 2008 & ISO AS9120:2009-A QC Procedures) in accordence with each of our individual customers stringent shipping and receiving requirments to ensure the authenticity of the product. www.linkedin.com/in/mikestifter
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RogerD_#2
8/17/2011 11:28 AM EDT
How much longer are we going to tolerate the inaction of the Chinese government to halt counterfeiting of all types - from ICs to Apple Stores?!?!?!? The Chinese authorities only give lip-service to the world's complaints about rampant counterfeiting, while at the same time allowing it with a wink and a nod - it's all about money folks, money=power, and the Chinese government is bound and determined to become the most powerful entity on the planet by whatever means necessary. You think China really cares about counterfeiting as long as it brings in profits to their country?? Don't be naive! China is the problem - and nobody is taking decisive action to stop them!
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Saturation
8/17/2011 3:11 PM EDT
A scary part is, and reiterated in this article, even if you buy from authorized distributors you can still get counterfeit instead. It seems in-house testing is the most foolproof way to spot them, and if they meet design specification, it won't matter if its counterfeit.
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mountaincore
8/17/2011 3:49 PM EDT
Accept that is rewards bad behavior.
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Dan.Deisz_#2
8/17/2011 6:26 PM EDT
Through most Authorized Distributors like my company (Rochester Electronics), it is not possible to get counterfeit. No returns and no grey market, only OCM product. In-house testing doesn't guarantee no counterfeit, this too is a huge variable. Buy Authorized is if available is still your best first step.
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McGookin
8/24/2011 1:32 PM EDT
It still matters. Buying counterfeit only helps the bad actors succeed and continue their ways. Ultimately it will matter a lot when lives are lost. Have a tip - email me - cory.mcgookin@ic.fbi.gov
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Cliff Keller
8/17/2011 3:39 PM EDT
Yes, you could even get bad parts direct from the Manufacturer. But, in the supply chain buying direct or through the franchised distributors drastically cuts the chances of getting bogus parts. Franchised distributors will be terminated by the supplier if they sell "gray market" devices, and that is too big a penalty for them to risk.
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elctrnx_lyf
8/18/2011 10:53 AM EDT
The recycling of electronic products is probably one reason for the fake components to enter the market. The only way to make sure that no fake components is to buy from authorized suppliers.
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Patk0317
8/18/2011 2:19 PM EDT
Gray market parts are more common during a downturn when companies who bought parts above board are forced to get rid of excess inventory that the supplier refuses to take back. The parts are probably perfectly good, but the manufacturer won't support them if they can show that those date codes were sold to company A and some other company is coming to them for tech support. Counterfeit parts are always an issue but again, date codes may prove they are counterfeit.
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Mike.Dillon
8/19/2011 4:18 PM EDT
The issue facing the DOD (and others) is that there is no traceable supply chain for parts that have been out of production for years.
The gray market is the only game, you hope there is unused inventory sitting on the shelf somewhere, but since all that was written off and surplussed (to get it off the books) a long time ago from the traditional supply chain, hard to tell what you get, testing does not help, since you don't have any idea of the production process, how do you do a statistical analysis ?
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TFCSD
8/25/2011 10:11 PM EDT
Back in the old days, older electronics disposal was so dispersed that reclaiming useable amounts of items to turn into counterfeits was unprofitable. Now everybody in a "green" effort are shipping everything to a few concentrated recyclers and vola! We have counterfeits galore.
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Netteligent
9/12/2011 4:25 PM EDT
Apple selling its well known apps, musics, videos for less than $5 or much less. The more populars, it costs much less.
You can rent or stream high quality videos from Hulu, Wal-Mart, Amazon, NetFlix for less than $15/mo with little annoying advertisements.
Industries listening to lawyers and spending billion of dollars on Digital Right Managements and fighting with copyrights.
Cutting down all the unnecessary "middlemen" and pass on saving to customers directly. Only values added providers will survive and grow.
Suddenly, all the "counterfeits" and "copyrights" in Entertainment Industry disappears.
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thiagorulez
5/13/2013 12:56 PM EDT
Most of these fakes are poorly refurbished products pulled from places like electronics disposal in Chicago, or wherever, and spotting them is really not that hard. As suggested, don't be cheap. If you must have the tech, pay for it.
http://www.acmeelectronicsrecycling.com/services/electronics-recycling
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