They were supplying to such people as Raytheon and BAE and apparently some other military subcontractors.
This was going directly into the supply chain of some fairly well known producers at a high level and then on to the battle field and critical military infrastructure.
You would think that such military manufacturers would have their supply chain fairly well tied down, but it appears from the article that this is not the case, and with this sort of damage being introduced directly into the military and by a number of different semiconductor suppliers one begins to wonder exactly what is going on inside some of these so called trusted distributors.
What was even more interesting is that they said as the price of silver is increasing, gold is slowly depreciating. I think it's due to the oversaturation of gold-selling/buying schemes out there. I guess people are back to ignoring gold and going for the shiny stuff again.
Dan, thanks for your feedback! I would suggest another driver of the supply/demand imbalance is the incentive to buy more than you need. I'm not sure how steep the discounts are for buying 1,000 of something vs. 650, but I would imagine buyers charged with reducing costs have to take that into consideration.
You are right--this isn't just a distribution problem, it is a supply/demand problem.
Kind of off-topic but it's interesting that you mention the 'Silver' aspect of the bullet. I was just reading an article today about the demand and value of silver is going throught roof. In reaction to that, there are alot of people that are counterfeiting silver coins, etc. to try and cash in on the hype.
This reminds me of the proverbial supply and demand graph we were taught in college. As long as the demand (I.e., EOL and Obsolete Components) are not designed out or lifecycled managed ( Total Cost of Ownership ) the supply of counterfeit components will proliferate. Hence, the standard advice often given to "use only approved component distributors " panacea falls on deaf ears due to it's idealistic naiveness.
The "Silver Bullet" cliche fits right next to the Zero Risk Holy Grail pursuit off....non-counterfeit components. Eventually, increased fatilities will insue and the reality of this experiment will become all to apparent.
As with many issues affecting life in general I would not lay the problem with counterfeit components on the distribution network. The key to the problem is that demand/supply do not match each other, and are often at odds with what is required. The independent Distribution and Broker market is at a minimum a $3 Billion industry, and as high as $15 Billion by some estimates. These numbers are not minor by any means, and they have consistently grown over the years...why? Manufacturers and their authorized channel have failed to meet the stringent demand requirements of the OEMs and CMs they serve. In addition, OEMs and CMs have failed to manage their supply requirements with demands they experience. All together we end up with shortages and excess scenarios. What is wrong with a Manufacturer wanting to recoup costs from perfectly good product by selling it? Nothing at all. That is like telling someone at Macys, Dillards, and JC Penny they need to destroy all the clothing they do not sell, because doing so leads to counterfeits or it could end up being sold by bad companies such as Marshalls, Ross, or even the Dollar General Store. What they are actually doing is providing the means to effeciently manage supply imbalances in the industry...and everyone benefits.
As an Independent Distributor we receive calls to help manage these issues, and explore the world to come up with a solution. Prior to calling us the OEM or CM contacted their Authorized Distributor network and possibly the manufacturer and did not receive the answer they needed. To do our job well we need to protect our customer. To do this, which may be a surprise to many, we source 34% of our product direct from manufacturers, 33% from Authorized Distributors, 30% from a trusted preferred network of 128 independent distributors we have worked with for years and the remaining 3% comes from the Open Market...or Gray Market. As a company we sit on the board and a member of the IDEA (Independent Distribution Electronics Assoc.), which is an organization that is taking the lead in establishing counterfeit detection policies. We have spent over a $1 million in X-Ray and Decapsulation equipment with 5 certified quality inspection specialists, and we inspect every part we receive to assure our customers they will not receive counterfeit parts. We have stopped parts we received direct from the Authorized channel and even a major IC manufacturer, who finally admitted to a policy of remarking aging shelved product after being confronted by our Director of Quality, who speaks at industry events as a expert on counterfeit detection.
There is an answer...only work with companies who have committed to the IDEA standard, invested in sophisticated inspection equipment and avoid pure Brokers who only have an interest in selling any part they can find in the open market and provide no inspection as to its validity.
Daniel McMillen, Director of Corporate Development - World Micro, Inc.
Trade channels and dealers are a major channel for entry of counterfeit material. Due to various specific needs of the customers(currency/stock/delivery/Low quantity) traders are intorduced into a authorized supply chain. This is where the tracking ends for all practical reasons and beyond this counterfeit forces play their game. Not to mention, these traders benefit heavily.
Great discussion going on! To answer a few questions: the most popular devices for counterfeit are usually the ones that are most expensive and/or at highest demand at a point in time. Semiconductors are the most popular, followed by various passives--I've heard mostly about capacitors over the years.
One of the ways these devices enter the channel is substandard devices and/or outdated product that are supposed to be destroyed are not; they are diverted, marked as new; and sold. Unless a manufacturer destroys the product itself, there is no guarantee a subcontractor actually does this.
Another way is the sale of excess inventory. Even though excess is supposed to be authentic product, authentic product is often mixed with counterfeits. Random lot testing may show an entire batch is authentic when it is not. This method is also used for returned products.
Suppliers and distributors have tried to alleviate this problem by not taking back products that are not in the original packaging. The problem is, this practice is spotty--if a customer is big enough or makes enough noise, exceptions are made.
As Brandwatch says, the best solution combines technology and practices. Finding that combination in the electronics supply chain continues to be elusive.
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.
Archived Dialogues
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.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
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.
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