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Counterfeit Components & the NIMBY* Effect

*Not In My Back Yard
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ppicone
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Stock Keeper
Re: The topic is...counterfeits
ppicone   5/7/2012 9:13:50 AM
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Hello Everyone.... This is Peter Picone from Epic International Electronics. I usually don't respond to forums but this one is one of the more respected ones. I just want to clarify something's on who I am and what my Companies were.

First, I have not owned a bunch of Companies. I had/have ownership in only 2 Companies. Tytronix and Epic. A little history, (I will try to be brief and short) Tytronix was around for 4 years. In the last year or so we ran into severe financial issues. We had a bunch of our normally good customers on NET 30 accounts, falling way behind or closing. We were not that big of a Company to overcome something like that. Combine that with we had a bunch of our suppliers that were normally trustworthy and shipped great product, started selling us a lot of bad parts. Unfortunately we were not equipped to overcome that. We spent our money paying for testing costs of these bad parts, shipping and refunds.

So, after Tytronix closed I vowed to come back but with a lot of changes. Epic started in 2009 and we basically cut 90% of the suppliers I had used at Tytronix. I only used 2-3 trusted ones over the 10-12 we used at Tytronix. Again, though smaller, things were going great again. We had also bought some test equipment in late 2010 or early 2011. In late 2011 we started getting more requests for returns again. It turned out at the time, I thought my supplier was getting desperate and selling bad parts. I cut them off. Epic was hurting. Come to find out on a few orders, even though we were testing them (Function and Acetone) parts were again coming back as possible refurbs/counterfeit.

Seems I was not aware until too late that these crooks had found a way around Acetone testing. I truly believe my good supplier was taken in this as well. So, here we go again. Now, I have made drastic changes here to match what a lot of other suppliers are doing as well. We will only ship parts that are either factory sealed with complete trace or if it is outside the US border, whether it is Europe or Asia, NOTHING ships in to us without a complete de-cap and x-ray test report. This will slow down shipping and increase costs but it is a small price to pay to absolutely ensure no bad parts get through us.

I do blame myself of course for not being as up to date on a lot of the changing aspects of our business as far as parts go. I have seemed to be behind the 8-ball and that is my fault. That will never happen again. Thank you all and sorry for the long post.

 

Barbara Jorgensen
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Blogger
Re: The topic is...counterfeits
Barbara Jorgensen   4/30/2012 3:30:51 PM
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Douglas: What's a little gray amongst colleagues? I first was introduced to the independent distributor model about 20 years ago and it has been a rollercoaster ever since. One of the things that always used to come up when I was talking to an independent was "let me talk to a customer." That still hasn't happened. OEMs deal with brokers all the time but don't want to admit it. Until everybody--suppliers, OEMs, distributors, brokers--come out from behind the curtian, there will be problems.

Barbara Jorgensen
User Rank
Blogger
How easy it is
Barbara Jorgensen   4/30/2012 3:25:03 PM
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The Internet and e-commerce has made a bad situation worse. But there have always been counterfeit problems in the industry.

Adeniji Kayode
User Rank
Production Synthesizer
Re: The topic is...counterfeits
Adeniji Kayode   4/30/2012 12:29:36 PM
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@elctrnx,

I agree with you on that, I am still of the opinion that that is little the government can do about even though that effort might go a long way but the best solution is to order from a reputable manufacturers that are traceable and can be held responsible in the case of malfunction.

FLYINGSCOT
User Rank
Supply Network Guru
Difficult one
FLYINGSCOT   4/30/2012 6:24:02 AM
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It is shocking how easy it is to set up these bogus operations.  More needs to be done by the OEMs by offering a validation service when only accredited distis are allowed to sell their products.  The consumer of the products also has a responsibility to validate their supply chain.

TaimoorZ
User Rank
Supply Network Guru
Ecommerce assisting counterfeiters
TaimoorZ   4/30/2012 2:19:24 AM
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"But the fact is, it takes very little capital to set up a distribution operation."

I think ecommerce is greatly helping the counterfeiters setup their distribution operations. With the help of an online website and electronic payment system, counterfeiters can set up their online stores and publish catalogs. They can book order for fake products, get them manufactured and supplied to the customers. They don't even need a physical office for all this.

prabhakar_deosthali
User Rank
Supply Network Guru
re:
prabhakar_deosthali   4/29/2012 7:42:23 AM
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Douglas - Yes I totally agree that the indirect cost of counterfeit part causing board failure, malfunction, cost of additional inspection and testing is much more that the actual component cost.

 

So in my opinion, we should hold the supplier responsible for all those damages and such act of supplying counterfeit parts should be treated as criminal offence by the law. Then only there will be some check on these counterfeiters.

The traceability of each component used in a product is very much essential to have a some control on counterfeiting.

elctrnx_lyf
User Rank
Supply Network Guru
Re: The topic is...counterfeits
elctrnx_lyf   4/29/2012 12:11:45 AM
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The best way to solve this issue could be to order components through authorised distributor only. But many a times people in urgent actually try to get these components from small n not much known distributors where the actual counterfeit starts.

Douglas Alexander
User Rank
Blogger
Re: The topic is...counterfeits
Douglas Alexander   4/27/2012 7:46:10 PM
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Cameron, America II is a great company. I hope they never get caught in the counterfeit crossfire. I did get some Xilinx serial PROMs from them where half of them were non functional, but they did not hesitate to give a full refund as soon as I sent the parts back to them. In general, the more ubiquitous the packaging, like an 8-SOIC, the more likely it is to slip anti-counterfeit detection. When their packaged 3000 to a reel, the first and last 100 may be the genuine parts, but the inner 2800 parts could be blacktopped or even reused originals. Nasty stuff for sure.

Douglas Alexander
User Rank
Blogger
re:
Douglas Alexander   4/27/2012 7:31:19 PM
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Prabhakar, In my experience, the part's cost part of the top level product cost is not that significant. Think of the added labor for board level assembly, test, handling, sub-assembly build and test, final build, burn-in, test, packaging, and shipping. All of these cost are easily accrued within a three month time period, however, even if you get reimbursed for the part cost that caused the whole product to go afoul, how much real money cannot be recovered for all of the other good components that cannot be shipped until the boards are troubleshot, more labor, and now slightly less reliable because of hand resolder...if possible, and other additional problems to other components causing a cascading or systemic failure? I don't think the cost of one part could ever one close to the cost of all the other problems that could arise as a result of a counterfeit slipping into the high-speed, high-volume production operation. I guess your suggestion is better than nothing, but I believe a pre-assembly authentication program wold be much more beneficial to all concerned. The technologies being introduced now, will greatly lower the cost for countering the counterfeiters and hit the where it counts....in their accounting.

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