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LorenSutherland
Kalifornia
Counterfeits can be original parts that were scavenged from e-waste and ...
IHS projects rise in counterfeit chips
Dylan McGrath
5/9/2012 1:50 PM EDT
SAN FRANCISCO—The counterfeiting of semiconductors is expected to become a more prevalent problem in the future as the semiconductor industry enters a phase of accelerating growth, according to market research firm IHS iSuppli.
The number of reported counterfeit-part incidents—which reached a record high of 1,363 worldwide last year—is expected to continue to rise to new highs, according to an analysis of trends conducted by IHS.
The number of counterfeit parts reported in the electronics supply chain historically has risen and fallen generally in concert with the annual performance of the global semiconductor industry, IHS said. Counterfeiting grew from 2001 to 2007 as the semiconductor industry expanded, but then plunged in 2008 and 2009 amid the global financial crisis and corresponding chip industry downturn, IHS said.
But when semiconductor industry revenue rebounded by a hefty 33 percent in 2010, reports showed that counterfeit reports surged by a whopping 152 percent, according to IHS. The firm projects that the semiconductor industry is this year entering a new expansion cycle, with revenue growth expected to accelerate to 4.3 percent, up from 1 percent in 2011. Growth is expected to rise to 9.3 percent in 2013, according to IHS.
"The semiconductor industry is exhibiting the classic signs of the start of a new growth cycle, with tightening supplies, broad-based price increases and a lengthening of lead times for the delivery of products," said Rick Pierson, principal analyst for semiconductors at IHS. "These are prime conditions for suppliers of counterfeit parts, which are eager to fill supply gaps with their fake goods. For semiconductor purchasers, the rise in counterfeits represents a major risk, bringing downsides in terms of financial losses, damage to company reputations and even safety concerns in some products."
According to IHS, most electronic components appear to be experiencing a tightening of supply along with an increase in pricing and lead times. Price increases are expected to continue rising throughout 2012, the firm said. The firm now predicts that demand will exceed supply in the third and fourth quarters for many widely used components, including capacitors, NAND flash, dynamic random access memory (DRAM), power semiconductors and logic chips. Such shortages represent a prime environment for counterfeiters to thrive, IHS said.
"Counterfeiters have gotten more sophisticated," Pierson said. "They watch the market and know where the weaknesses are. They know which products are in short supply and can generate profits. And they also know when market conditions are shifting in their favor."
For example, IHS said, counterfeits surged in the wake of the Japan disaster when concerns regarding supply shortages prompted panic buying of semiconductors and other components.
"It’s critical to discuss the counterfeit issue, to understand the reasons why incidents of fake parts are on the rise and to identify the markets where these phony parts are appearing," Pierson said. "This is because the counterfeiters are certainly analyzing the electronics market, probing for weak points and seeking opportunities to exploit opportunities as they arise."
Next: Supply chain pitfalls
The number of reported counterfeit-part incidents—which reached a record high of 1,363 worldwide last year—is expected to continue to rise to new highs, according to an analysis of trends conducted by IHS.
The number of counterfeit parts reported in the electronics supply chain historically has risen and fallen generally in concert with the annual performance of the global semiconductor industry, IHS said. Counterfeiting grew from 2001 to 2007 as the semiconductor industry expanded, but then plunged in 2008 and 2009 amid the global financial crisis and corresponding chip industry downturn, IHS said.
But when semiconductor industry revenue rebounded by a hefty 33 percent in 2010, reports showed that counterfeit reports surged by a whopping 152 percent, according to IHS. The firm projects that the semiconductor industry is this year entering a new expansion cycle, with revenue growth expected to accelerate to 4.3 percent, up from 1 percent in 2011. Growth is expected to rise to 9.3 percent in 2013, according to IHS.
"The semiconductor industry is exhibiting the classic signs of the start of a new growth cycle, with tightening supplies, broad-based price increases and a lengthening of lead times for the delivery of products," said Rick Pierson, principal analyst for semiconductors at IHS. "These are prime conditions for suppliers of counterfeit parts, which are eager to fill supply gaps with their fake goods. For semiconductor purchasers, the rise in counterfeits represents a major risk, bringing downsides in terms of financial losses, damage to company reputations and even safety concerns in some products."
According to IHS, most electronic components appear to be experiencing a tightening of supply along with an increase in pricing and lead times. Price increases are expected to continue rising throughout 2012, the firm said. The firm now predicts that demand will exceed supply in the third and fourth quarters for many widely used components, including capacitors, NAND flash, dynamic random access memory (DRAM), power semiconductors and logic chips. Such shortages represent a prime environment for counterfeiters to thrive, IHS said.
"Counterfeiters have gotten more sophisticated," Pierson said. "They watch the market and know where the weaknesses are. They know which products are in short supply and can generate profits. And they also know when market conditions are shifting in their favor."
For example, IHS said, counterfeits surged in the wake of the Japan disaster when concerns regarding supply shortages prompted panic buying of semiconductors and other components.
"It’s critical to discuss the counterfeit issue, to understand the reasons why incidents of fake parts are on the rise and to identify the markets where these phony parts are appearing," Pierson said. "This is because the counterfeiters are certainly analyzing the electronics market, probing for weak points and seeking opportunities to exploit opportunities as they arise."
Next: Supply chain pitfalls
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prabhakar_deosthali
5/10/2012 1:03 AM EDT
The only solution to protect against counterfeits is to have 100% traceability and accountability of everything used in a product right from the manufacturer to distributor to retailer to the shop floor to the finished goods thru out the life cycle of the product right up to a stage when the product is scrapped.
if you make a party accountable for the damages then such infiltration of counterfeit parts will automatically have a check
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Rchandta1
5/10/2012 12:35 PM EDT
What happened to "Serial number" hard-coded in chips - a campaign started by Intel a decade ago? I recall there were some privacy concerns then. Are there any more such schemes?
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VE3ZXT
5/10/2012 12:38 PM EDT
It's hard enough to fab and get decent yields when you are the rightful owner of the right to fab the parts. This counterfeiting can't be for anything more than simple components, no? What do the counterfeiters do - steal the golden GDSII? Reverse engineer the entire circuit and layout?
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Brakeshoe
5/10/2012 5:55 PM EDT
Don't forget biomedical devices: That automatic electronic defibrillator (AED) can kill you when a part fails~
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Spuderator
5/11/2012 1:50 AM EDT
@VE3ZXT
Usually you receive a sample quantity to verify the integrity of the supplier, these chips are authentic chips. But when the large orders are placed, chips arrive with the same form factor just nothing inside. Empty shells of BGA's, SOTs anything. Usually simple components don't offer enough margin to bother counter fitting. The fact that you actually get a component that looks like the one you should have is the problem, because then they are signed for an money is handed over.
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DrQuine
5/13/2012 10:59 PM EDT
Are counterfeit chips getting any better as increased effort is directed to detecting them? I could imagine the possibility that eventually high quality "generic" chips that rob intellectual property owners of their proper revenues might emerge. Creative "generic" vendors might even shadow product recalls by the legitimate suppliers. Special techniques may be needed to find fully functional high quality "generic" chips. Finding the "fake" / mislabeled / non-functional chips is easy in comparison.
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Kalifornia
5/15/2012 12:35 PM EDT
Counterfeits can be original parts that were scavenged from e-waste and remarked. In many cases, the counterfeit part is real, but its life history is unknown - That is, reliability suspect. It gets even worse.
If you have not actually seen details of what counterfeiters actually do -- I highly recommend finding a paper, a class or attending the next DMSMS meeting (Google DMSMS 2012).
BTW, this has been going on for over 30 years that I've been a degreed Engineer. The sophistication of counterfeiters and awareness are the only things that have changed.
The old empty parts are easy to find. Extensive electrical testing may be necessary to find false upgrades or used parts (and even then it may not be possible to tell electrically until premature failure start showing up). ESD walking wounded -- almost guaranteed.
How about counterfeit drugs and even pressure bandages? If you can sell it, it’s being counterfeited!
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LorenSutherland
6/22/2012 4:25 PM EDT
Check out: www.americanminifoundry.com and www.chipsecutiy.org
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