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Anti-Counterfeit Measure: Get It in Writing

What can I do as a purchasing agent for a small company to ensure I will not get counterfeit or used components from an electronics parts broker? This wasn't a big issue 20 years ago, but it is becoming more and more of a problem with just-in-time purchasing policies and more expensive integrated circuits like systems on a chip (SoC).

For an enterprise to succeed, it has to offer a unique, cutting-edge product, or it must offer a product similar to its competitors but at a significantly lower price. For new technology or product enhancements, the design engineer not only considers the functionality of the circuit and its component requirements, but also the part count and costs, including assembly.

When given a budget for the finished product, the designer will weigh the features or functions of any particular component against using less expensive alternatives. The component engineer helps the design engineer with the availability and cost study. Newer, more feature-rich parts may be at the heart of the design, and the designer may have to use bleeding-edge components to meet performance and size requirements.

The selection of the newest parts often gives purchasing little choice, since there is frequently no alternate that will do the job. Purchasing is backed into a corner where it may only have one supplier, which requires a minimum purchase at a very high cost. This single-source situation raises a green flag for counterfeiters.

A ball grid array (BGA) package of a certain ball count arranged in the same pattern as other BGAs may be easily blacktopped and remarked. This is old news, but it remains a problem. The counterfeiters know that, unless I have a very expensive, custom-made BGA socket mounted on a test board with full circuit functionality, their part would likely make it to my stock room and on to the assembly house. Incoming inspection would have to open sealed packages and test the BGAs individually to guarantee the entire lot. Then the parts would have to be baked to dry out any humidity gained during the exposure required for testing, and the bags would have to be resealed and assigned a certification lot and date traveler. If I have several different BGAs on the same board, incoming inspection may become the most expensive component of my in-house labor costs.

I started this article talking about a small company. Unless the equipment and procedures for incoming inspection are in place as mentioned above, a counterfeit part could easily impact the company's viability. Even though a small company performs both system-level and final tests before shipping to customers, the cost of rework and schedule compromise could result in reduced margins or the loss of critical customers with their own critical internal schedules for their business concerns.

Before purchasing places its first order for any highly integrated, cost-intensive, multi-pin, or multi-ball part, it should ask what the supplier has done to guarantee the product it has on its shelves is not counterfeit. Get a copy of the test date and lot number, and ask for that information to be included on the packing slip. Also, amend your purchase order terms to indicate that it is the supplier's responsibility to cover all costs for rework, repair, and replacement if any certified part is found to be counterfeit.

If the supplier balks at this, it does not have confidence in its own counterfeiting detection measures. If that is the case, neither should you. However, if this is a single source and you have to buy from this company or die, your component engineer and design engineer have not done their jobs. This issue should have been addressed early in the design stage, when the part was being selected. Purchasing cannot make up for poor design disciplines.

Make sure there are two supplier-related questions on the design checklist: Does the supplier certify parts as noncounterfeit, and does the supplier cover the costs for counterfeit parts discovered after you receive them at your facility? Making these two questions part of your design check process will save you a lot of anguish when the factory begins to buy and build in high volume.

10 comments on “Anti-Counterfeit Measure: Get It in Writing

  1. elctrnx_lyf
    August 28, 2012

    Many times the counterfieting was the issue of production in the past but this will not be the case in the future. The design engineers along with component and sourcing team should make sure the counterfeiting parts will not be an issue by making sure of alternate parts availability and also the correct terms with component suppliers in case any counterfeit components enter into the production.

  2. prabhakar_deosthali
    August 28, 2012

    For the engineers working in small companies the job of balancing the right design with right sourcing is much tougher than those working in large organizations.

    Whatever parts the designer will select the proprietor of the company will overrule in favor of cheaper parts to save cost.

    Whatever part finally gets approved , the purchase guy will buy it from some obscure source because the credit terms are better .

    Whatever order the obscure source gets from such small companies he will sell parts from some rejected or counterfeit lot because he knows that the company does not pay him on time.

    With such a vicious circle , it is difficult for the small companies to get out of the counterfeit rut so easily

      This is from my own experince in working at a small company a few years back.

  3. SP
    August 28, 2012

    Agreed in small companies cost dictates many decisions. But I guess a good project management practice can show the advantage of many points cited in this article. I agree many times its difficult to convince senior management especially if they are non technical.

  4. syedzunair
    August 28, 2012

    SP:

    Even if the cost dictates the terms in many decisions it does not mean the companies resort to using counterfeit parts in their manufacturing process. 

  5. dalexander
    August 28, 2012

    @SP…I strongly agree with you. On the contrary, the buyer has a moral and ethical obligation to expose the supplier offering counterfeit parts. If a part is sold as new but is in fact used, then that is fraud. The reliability of the product is in question, and the end customer is being ripped off whether he or she knows it or not. Counterfeiting is never necessary or right.

  6. dalexander
    August 28, 2012

    @Prabhakar, can you please give us a real life example of what you are talking about? If the designer is designing with only cost in mind, then he or she is doing the company a great harm. Brokers adjust their prices based upon demand. If a part goes on allocation, the same supplier who got the design win, may sell the first unallocated lot at a cheap price, but when times are tough, that price is going to skyrocket. The designer should be using parts with multiple sources and that have the best performance required in order to meet the operating margins the product needs to survive in the field. A counterfeitier will lie about part numbers and they will lie and even forge specifications and certificates of compliance.

  7. Barbara Jorgensen
    August 28, 2012

    I absolutely agree the process you suggest is a fail-safe for small or any-size companies. Here's one issue I see for the small guys, though: they may not have enough clout with suppliers to get that information in a timely manner or at all. True, a responsible supplier will provide the appropraite information no matter what.

    The other issue I see is technically, suppliers “guarantee” a part isn't counterfeit by their warrantees. They additionally put the onus on customers by stating any part not bought through an authorized source will not be supported or replaced. It seems to me this is an “out” for any supplier that doesn't want to answer any additional questions.

  8. garyk
    August 28, 2012

    Question: Why didn't we have Counterfeit problems 20 years ago? What has changed? Two simple questions tobe answered.

  9. prabhakar_deosthali
    August 29, 2012

    Douglas,

    There have been many instances when a substandard or duplicate part was forced upon to be used in the product in the company in which I was working. One of the proudcts was the TV remote in which the conductive ink being used on the touchpads was a substandrad one and it was with the knowledge of purchase and managment just to reduce cost. When we had umpteen problems of failed remotes in the field, finally the engineering manager had to become toucgh enough to get the required quality ink from a reputed supplier.

    Similarly the EPROM Ics ( 2764 at that time ) were being bought from some garage shops and the purchase people used to carry them in their shirt pockets ( disregarding the antistatic norms ) and we would be lucky if one out of four ICs worked properly ( many times they would have rusted legs -indicating they were definitely picked up from some discarded boards)

    I was also part of a vehicle manufacturing company where in the name of value engineering the originally designed parts used to be replaced by some third party cheaper parts by purchase dept to save costs.

    So in my opinion unless the manufacturer himself is commited to a quality product, the suppliers will continue to take advantage by supplying second quality counterfeit parts

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    June 4, 2019

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