Investors love winners, and so do counterfeiters. That's why they've been targeting a pool of semiconductor products that together make up more than half of the total chip market, according to data from the research firm IHS Corp.
The electronic parts most targeted by counterfeiters account for about $169 billion of the slightly more than $300 billion semiconductor industry, IHS said in a report. The top five part types are analog ICs, microprocessors, memory ICs, programmable logic, and transistors. "Together, these five component commodity groups accounted for slightly more than two-thirds of all counterfeit incidents reported in 2011."
The components are attractive for counterfeiting because they ship in huge volumes. Their commodity nature also plays a role -- the components are widely available and are used across many of the major electronic markets, including personal computers, industrial and automotive equipment, and wired and wireless communications.
The good news for the industry is that manufacturers are reporting counterfeiting more frequently these days. Previously, companies didn't want to disclose these incidents because they worried the mere whiff of illegality would taint their reputation and hurt sales. However, with increasing publicity and global government actions identifying the impact on military and communication systems, more companies have introduced steps to notify authorities immediately about fake parts in the supply chain.
IHS said in a press release on its report:
For many organizations, addressing the costs and risks associated with counterfeits is not just important, it’s also regulated. On December 31, 2011, President Barrack Obama signed the H.R.1540: National Defense Authorization Act for Fiscal Year 2012. The act mandates that participants at all tiers of its global defense supply chain implement processes and systems to analyze, assess and act on counterfeit and suspect counterfeit electronic parts.
While the top five most counterfeit or fraudulent parts represent a major portion of the counterfeit problem, multiple other types of devices also are vulnerable to counterfeiting and fraud. 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.
I am fascinated by this list and its implications. I'd love to know--and it might be impossible to do so--how much of this stuff is discarded goods and how much is being processed from scratch. Analog parts are really complex and must be difficult to duplicate. Yet, we know counterfeiters are getting better. This is a real eye openiner.
As a side comment to the article, I suspect that the top five reported IHS categories are the easiest to find counterfeits, not to mention the highest margin parts. When you look at the pictures in the Power Point presentation above, passive devices are also being counterfeited and there is a lot of them.
While the high-reliability industry is in the limelight because of the recent Levin-McCain senate meetings showcasing the problem, a vast majority of the part numbers in the ERAI database are commercial part numbers. COTS parts are an obvious opportunity to get counterfeits into a military hardware supply chain, the commercial market is a far easier target to hit.
After the intrusion of counterfeits seen going into the market that I have seen by watching daily ERAI reports, I have taken to buying service contracts on all my high end electronics purchases at home.
It used to be purses that were counterfeited, but now it is anything that can turn a profit – pharmaceuticals, assembly equipment, even packaging materials.It's downright scary.
This is really an eye opening article. There was a repsort in Electronic design news last year depicting the increase failure rates and also the impact of counterfeited electronic part on the reliability aspects. It was a shocking report.
Another menace is the usage of salvaged components. Components which are removed from old or scrapped instruments are given a facelift and are sold as new components. These are alarming facts when you think of the possibility of those components beign used in medical and other mission critical/ life critical applications.
There are many ways of identifying counterfeit products. For example, X-Ray inspection, bar codes, RFID tags, electrical inspection etc. However, unfortunately there is no easy way of getting rid of this.
Counterfeiters are becoming more and more efficient with time. They are devising new startegies to infiltrate these detection mechanisms. Firms, on the other hand are trying their best to identify such products in their supply chain.
IHS primarily tracks the semicondcutor industry--semis being the largest most lucrative components market. But with 80 percent of a PCB being IP&E, counterfeiting is just as big an issue. In particular, when tantalum is scarce, counterfeit capacitors begin to crop up. Even a shortage of certain packaging can prompt an outbreak. There are so many stops along the manufacturing and packaging process that a fool-proof system seems impossible.
For a counterfeit part to get into a product, it must pass through the inward inspection and has to show same functionality of the original part.
I am interested to know at what point in time/life cycle of a product does one detect that a part is counterfeit?
In my life time as an engineer we used to get counterfeit parts but in most cases they used to get filtered out in the inward inspection process itself and most of the time such parts had been hastily bought by our purchase people from unauthorised sources.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.