A Low-Tech Remedy for Counterfeiting

The supply chain can throw all kinds of technology toward preventing and identifying counterfeit parts, but sometimes plain old word of mouth is the most effective strategy.

Aimtec, a maker of switching power converters, issued a warning last week that counterfeit converters were being manufactured and sold in the global supply chain. In addition to issuing a press release, Aimtec emphasized that its products are sold only through authorized distributors and lists its distributors on its Website.

As part of its warning, Aimtec says: “The company cautions customers from purchasing products from any source other than those listed on its website and warns that products purchased from an unauthorized distributor are not supported by the company's warranty.”

This advice is echoed by the National Electronics Distributors Association in its guide to anti-counterfeiting best practices.

A couple of years ago, the CEO of a small US-based EMS provider told me he was reluctant to publicly recommend that sources of counterfeit components be flagged — either on the Internet, by email, or on a list of suspect sources compiled by an independent distributor advocacy group. Among other things, he said such a practice could cause ill will in the industry and open up the possibility of abuse through false accusations.

To its credit, Aimtec isn’t pointing fingers at any sources. It’s spreading the word that counterfeits are in the channel. Word of mouth or vehicles such as this Website, Twitter, and Facebook can get the news out more quickly than anything else. And it’s low-tech: RFID tags and scanning equipment are great anti-counterfeiting measures, but they’re still too expensive for most suppliers and distributors that would have to tag literally millions of components.

The next step, of course, is finding and prosecuting the counterfeiters. This is extremely difficult and expensive, however, Analog Devices successfully pursued such a case in India in 2004, and more recently Molex prevailed in a patent infringement dispute in Taiwan.

In the meantime, measures such as Aimtec’s can help alert buyers that bogus parts are in circulation.

An interesting side note: One of the ways a buyer can identify a counterfeit Aimtec part is by its “unreasonably low resale price.” In the coming weeks the topic of pricing — global and otherwise — will be examined here on EBNonline.

7 comments on “A Low-Tech Remedy for Counterfeiting

  1. bolaji ojo
    October 4, 2010

    One challenge the industry has with counterfeiting is that few companies want to admit their supply lines have been infiltrated with fake or substandard parts. That's why it is believed the incidence of counterfeiting is under-reported in the industry. The belief across the market is that admitting to having counterfeit products in your warehouse could create a negative impression about your operations.

    Counterfeit products get into the supply chain through various channels and the presence in a particular company's warehouse is not necessarily a sign of negligence. No single company can test all the returns it gets from customers. However, by being open about this subject companies can help the entire industry reduce, if not completely eliminate the problem.

  2. Barbara Jorgensen
    October 4, 2010

    There is no absolute remedy for counterfeits. They can enter the authorized channel through returns. The additional concern regarding counterfeits is a manufacturer's warranty does not apply if the part fails in the field and if the part was purchased somewhere other than from an authorized distributor. Just about anyone will take returned products and make good on the order. The question is, will the manufacturer stand by its product if its movement through the channel cannot be proven?

  3. tioluwa
    October 4, 2010

    I wonder why a company would not want to expose counterfit goods.

    Toyota boldly withdraw faulty cars when they found a flaw to secure their IMAGE

    If a company hides the truth about counterfit products and they are discovered by customers, their image will suffer more than if they exposed it themselve and showed the public what they are doing to prevent it.

  4. disty advocate
    October 8, 2010

    the companys that dont bring forth the counterfeit truth is that they dont care for the most part, they are in this for the money. almost exclusively this is a broker deal. i would be interested to know how many oems willing hold back that they suspect counterfeit product might have made its way in their end product flow.

    now the reality we all must accept is that oems, odms, ems , component manufactures and even authorized distys continue to sell to brokers. that enables the brokers to sustain the front end model and then back fill, cheat, lie, and obtain counterfeit if needed. i am not saying all brokers {excuse me independent disty} do this, there are a few very good independents that have programs to insure product authenticity but not many. i know for a fact the many of the problems for the larger brokers is their puchasing process. they just dont have enough of talented and educated buyers let alone a process in place to properly acquire product.

    until there can be some alliance established between the authorized and independents,– mandated validated testing,verification of date code etc before any purchase happens from a independent—-not to mention more awareness and support from the feds ————this problem isnt going away any time soon.

  5. Barbara Jorgensen
    October 8, 2010

    The blame is absolutely shared among all members of the supply chain from the suppliers that sell excess product (or oversell to their customers) to the OEM/EMS to the channel– authorized or otherwise. Even suppliers and authorized distributors have taken in returned products later to discover they were counterfeit. There is no 100% solution, and it's low risk for the counterfeiters until a supplier or the federal government prosecutes. But it takes deep pockets to see something through to that conclusion and my guess is it's the small and midsize compnaies that are most hurt by counterfeit goods.

  6. hwong
    November 30, 2010

    I can see that RFID may not be all that helpful in counterfeiting with alot of products.  One application where RFID is best applied is the pharmaceutical industry where drugs are expensive and justify the use of RFID to keep track of medication.  When people switch out drugs with the fake ones, then it costs the pharmceutical companies millions of dollar for the lawsuit that may ensue. Hence using RFID to track each stage of the whereabouts of the inventory is a sound decision

  7. Ariella
    December 1, 2010

    Barbara, the last paragraph is key. Yes, if the price is too low, you should suspect that you are not being sold the genuine article.  Those of us who know that things that seem too good to be true are not true realize that.  Those are the people who buy the knockoff designer handbags, watches, etc. on the streets of Manhattan, knowing full well that they are not getting genuine Prada or Rolex for $15.  But there are always some people who like to believe they were very lucky and bagged a real bargain.

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