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RWatkins
Frank, I have to disagree with you TOTALLY here. The solution to problems like ...
agk
Yes correct Bill. The expertise or the test facilities are not geared up for the ...
IHS: Counterfeit parts represent $169B annual risk
Dylan McGrath
4/4/2012 2:14 PM EDT
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.
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.
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ricardonest
4/4/2012 3:28 PM EDT
Didn't know how prevalent this was. It almost feels like businesses need to vet through all their chips, just to ensure they are in working order. Regardless, this is a pretty crazy situation.
-Ricardo Nest
Member of the semiconductor group at Patexia:
http://www.patexia.com/pages/semiconductors/content
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karen.field
4/4/2012 3:32 PM EDT
Dylan - the enormity of the problem is really troubling. Do you have any insight on why analog parts (as well as the other top five) are the most frequently counterfeited? Or, are they just reported on more frequently?
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OldSchoolTwidget
4/4/2012 5:20 PM EDT
It seems to me it's probably both. Analog parts, especially op-amps and comparators are probably easier to counterfeit. Many applications can work, sort of, with a generic op-amp or comparator: not all specs are critical to all applications. For an AC-coupled audio amplifier, an out-of-spec DC offset voltage might go unnoticed. However, in an application where the input offset voltage is critical, the problem becomes obvious. There are enough such applications that the counterfeit parts are detected and reported more often... but probably not as often as they find their way into products.
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jp.lusinchi
4/5/2012 3:04 AM EDT
As a former Division GM of an international IC company invoved in Analog IC, I can tell you what is my experience on the subject.
One of the problems is the managementof the wastes. It is very easy for a supervisor of the night shift to put apart the ICs falling into a minor defect bin, or the ICs rejected for minor cosmetic problems, and resell them on the black market, which is, in China, very well organized. Just consider the money one can make selling ~1000 parts ( the rejects during one single night for a given IC) at 20 or 30 cents, when his salary is just the equivalent of 150 or 200 USD/month.
It is possible to control that-we did it- but it requires a very strict discipline enforcement, which has a cost in term of additional staff and controls.
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dylan.mcgrath
4/5/2012 5:28 PM EDT
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.
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BicycleBill
4/4/2012 5:03 PM EDT
I think analog parts, such as op amps and converters, are "easiest" to counterfeit or substitute with a lesser part because the fucntionality is the same with the fake as the genuine--only the full-range performance may suffer. A "decent" counterfeir op amp works the same as a really good one, except at the extremes or in some specific parameters.
And most users don't have the time or expertise to fully test these parts for specs such as bias current, drift, or linearity on the bench--and certainly can't afford to do it in production. They count on the vendor's part meeting the operational parameters, especially after they have qualifed the prototype and first run and are satisfied that all is well.
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agk
4/9/2012 5:27 AM EDT
Yes correct Bill. The expertise or the test facilities are not geared up for the analog ic's. So counterfeits goes unnoticed many times.
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Frank Eory
4/4/2012 6:44 PM EDT
To solve this problem, the first step is categorizing the different types of counterfeits and the relative quantities of each that are making it into the supply chain.
By different types of counterfeits, I mean IC packages that contain one of the following: (1) salvage (waste) die that was meant to be scrapped/recycled; (2) Commercial grade die but package markings indicate Industrial or Military grade; (3) Substitute die (different from package markings); (4) Used parts sold as new -- and any other categories I might have missed.
The first group is one that the industry should be able to control as part of its waste management procedures.
The second group most likely consists mostly or only of packages that have been re-marked, so perhaps a more thorough physical inspection could reveal the fakes.
The third group probably consists only of analog ICs. This is the most insidious and difficult group to detect, because here the counterfeiter is literally doing his own wire bonding & packaging, substituting the die of his choice with similar functionality (e.g., cheap op-amp instead of expensive one).
The fourth group, like the second, might be detectible by more thorough physical inspection. An IC that has at some point been soldered onto a board should have some tell-tale signs.
Things like re-labeling or selling used parts as new are easy to comprehend, but it boggles the mind to imagine that there are criminals out there who could manufacture ICs in categories #1 & #3. That means they have access to real IC assembly facilities -- which one would assume are all legitimate businesses that would never agree to assemble counterfeit ICs.
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RWatkins
4/9/2012 10:19 AM EDT
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.
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Rob Best
4/4/2012 7:45 PM EDT
Who's doing the counterfeiting(i.e. governments, private or both)? Where are they coming from? China? Russia?
Anybody know?
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Neo1
4/5/2012 4:55 AM EDT
Counterfieting of elctronics products is very common because it is very lucrative once established.
I feel the analog ICs percentage is higher just because they are in existence much earlier than their digital cousins and its relatively easy to find swap parts. With digital ICs its hard to find compatible parts because of their nature.
The counterfeiting business is more or less tied with the regions where genuine parts are manufactured. Once a paricular IC's data sheet is matched for quiescent conditions the fake is ready to be on the shelf.
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RWatkins
4/5/2012 10:24 AM EDT
Gentlemen, gentlemen... It seems like everyone is bemoaning a problem to which we all understand the true fix, but no-one is willing to make the first move towards. A severe degradation in the quality attributed to ones company products is the present cost of this unwillingness to move production of parts and assemblies either on-shore or to a more reliable (and expensive) environment where quality is assured. The mega-dollar question is whether quality is worth the higher cost of this change and how it will impact company futures. In the mean time caveat emptor for those who are making stuff overseas in several countries known to engage in the counterfeiting practices.
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george.leopold
4/5/2012 10:32 AM EDT
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.
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Borge
4/5/2012 4:06 PM EDT
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.
Børge
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Borge
4/5/2012 4:08 PM EDT
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.
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tigerslair
4/5/2012 4:13 PM EDT
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.
miron.abramovici@tigers-lair.com
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antiquus
4/5/2012 6:16 PM EDT
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.
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Robotics Developer
4/5/2012 6:26 PM EDT
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.
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Rob Best
4/5/2012 7:07 PM EDT
Who's doing the counterfeiting(i.e. governments, private or both)?
Where are they coming from?
China? Russia?
Anybody know?
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