ERAI Inc., a global organization that monitors and investigates issues affecting the supply chain, reported a total of 771 suspect counterfeit and nonconforming parts in 2017. This is a marked decline from prior years, the organization said.
At the same time, the ERAI is cautious about drawing conclusions from a one-year trend. Global semiconductor sales have increased, ERAI notes, and the decline could be associated with robust anticounterfeiting efforts adopted by procurement organizations. Fewer counterfeit parts may be entering the U.S. due to customs seizures and detentions. There could also be a lack of enforcement of government and industry counterfeit-reporting requirements.
So far, ERAI is not seeing the same trend in 2018. From Jan. 1 to June 30, 2017, ERAI reported 361 nonconforming or suspect counterfeit parts. From Jan 1 to June 20, 2018, ERAI has reported 462 parts.
“We are closely monitoring various variables to help us determine the actual basis for the rise and fall of reported part incidents, but at this time we are merely speculating,” said Kristal Snider, ERAI group owner and partner at InterCEPT. “We should expect widespread allocations will result in more counterfeit activity. It will be interesting to see how the year unfolds.”
It’s also possible some counterfeiters have reduced their activities due to improved and new counterfeit detection techniques, added Damir Akhoundov, ERAI IT manager. “On the other hand, it may also indicate that more sophisticated counterfeiting techniques are resulting in fewer counterfeit parts being detected and, therefore, reported to ERAI.”
“It will be interesting to see if this trend persists through 2018 or whether the decline was only temporary,” Akhoundov said.
Historically, incidents of counterfeits increase during times of component shortages. When the authorized supply chain reports long lead times and allocation, manufacturers turn to independent distributors that buy and sell devices on the open market. Independent distributors also have a unique perspective on parts that are in short supply.
“We are still seeing strong demand with passives leading the pack,” said John McKay, president of sales for distributor Freedom Sales. “The demand is from all regions. Asia specifically has increased demand and is more willing to design in alternates to second source the AVL. We are seeing longer lead times and decommits from our supply chain,” added McKay.
Many independents have taken significant steps to reverse the impression they are vulnerable to counterfeits. Others, however, still actively push counterfeits into the supply chain.
Orange County distributor PRB Logics Corp. has been charged by the U.S. Department of Justice (DOJ) for sale of counterfeit ICs that could have been used in military applications. The indictment alleges PRB principal Rogelio Vasquez acquired old, used and/or discarded integrated circuits from Chinese suppliers that had been repainted and remarked with counterfeit logos. The devices were further remarked with altered date codes, lot codes or countries of origin to deceive customers and end users into thinking the integrated circuits were new, according to the indictment. Vasquez then sold the counterfeit electronics as new parts made by manufacturers such as Xilinx, Analog Devices and Intel.
Military equipment is a significant target for counterfeiters because components are costly and military-spec components are increasingly rare. Military equipment – along with devices used in marine, medical and aerospace applications – outlasts many of the components used in their design. These industries frequently turn to commercial off-the-shelf parts that become obsolete relatively quickly.