A few months ago, I was watching a CBS 60 Minutes feature called "Wasteland." The investigative team was tracking electronic waste (e-waste) from a recycler here in the United States. After the owner of the recycling business had sworn that he was not exporting goods out of the US, 60 Minutes caught him doing exactly that.
CBS set up a sting operation where they offered to buy 1,500 CRTs (cathode ray tubes) and some 500 computers and have them recycled overseas. The owner took the bait like a widemouth bass, and, as 60 Minutes followed the e-waste from Hong Kong to China, they discovered that the CRTs had made their way into a small, poverty-stricken province and into homes of the neediest people in China.
Entire families were engaged in desoldering components over open coal fires. They would separate these components by packaging similar items into small paper cups. They had no masks, gloves, or any other equipment that would protect them from the lead or other hazardous chemical fumes. 60 Minutes said it was like 21st century electronics being disassembled with 16th century tools. The commentator noted that there is about two to three pounds of lead in every CRT. One interview with a home worker showed burns on the worker's hands and arms.
"Why do you do this?" the reporter asked. The worker responded for all his fellow workers: "Because the pay is good." The gangs that were running the loosely confederated workers were paying $8 per day. Compare that with the legitimate Foxconn Electronics Inc. pay of $1.78 per hour, and you have the reason we have a very complicated counterfeiting problem. While this is a technical, safety, and legal problem, it is, at its very root, a human problem.
I had a very wise person tell me that if I wanted to get closer to the root of any problem, I should ask "Why?" no less than five times. Here is the idea: Consider a problem where a particular electronic circuit failed. Why? 1) The regulator burned out. Why? 2) It received too much current. Why? 3) One of the series input resistors shorted. Why? 4) The power supply crowbar circuit diode was the wrong value and the over current protection failed. Why? 5) The wrong part was mixed into the stock bin with the right part. Voila! It is at its core an inventory management problem and not a circuit design failure.
Now ask the five Whys of the aforementioned Chinese worker: Why are you doing this miserable job? 1) My family has to eat or we will die.
Hmm, one Why was sufficient for an adequate explanation. At this level of crime, the "criminals" have very little choice. Remember, our crime started in the US and it involved lying, deception, and smuggling, but most of all, a love for money that far exceeded the sense of harm the business was initiating. It resulted in burned hands and lead poisoning, along with the absolute fact that those same parts being salvaged would find their way back into both the illicit and licit supply chains, potentially causing additional harm if used in critical applications.
At present, the industry spends millions of dollars testing products for authentication. One of the newest technologies being explored is Radio Frequency Identification. RFID and track-and-trace based anti-counterfeiting approaches enable automatic mass authentication. With these approaches, tagged products can be authenticated throughout the entire supply chain, helping to pinpoint counterfeiters' injection points, thus making it possible to detect counterfeits early in legitimate supply chains and deterring further propagation.
RFID technology is being investigated as a near-foolproof means of following inventory from source to customer, as described in a 69-page report funded by the European Commission and titled "BRIDGE" for Building Radio frequency IDentification for the Global Environment. Here is a direct quote from the report: "…serialized Tag ID (TID) numbers currently provide a practical hurdle against cloning, but this is no real protection and can be overcome with a 10 EUR impersonation device."
If a cloned tag enters the supply chain before the corresponding genuine tag is read, the cloned tag will go unnoticed, and an alarm will only be triggered when the genuine tag is read. As a result, the counterfeit product can already be consumed before the alarm is triggered. In short, build a better lock and someone will devise a new tool for picking it. This one-upmanship may be regarded as a "war of escalation"; brand name companies have to keep escalating their anti-counterfeiting technologies to protect their supply chains.
The RFID technology can also be defeated if the counterfeiter can remove genuine tags and reapply them to counterfeit product packaging. Then the real deal is sold outside the licit supply chain while the fakes are making their way to a reputable wholesaler or distributor. This tag swap is called a one-to-one exchange. The counterfeiter could also actually replace the contents of a shipping container with the bogus products, leaving the tags untouched, while making off with the genuine product. This also is a one-to-one exchange.
Obviously, it is the very nature of the one-to-one exchanges that make them so hard to detect. Interviews with experts from customs organizations and affected companies reveal that the knowledge about particular counterfeiting strategies, routes, and entry points into the supply chain is extremely limited due to the clandestine, illegal nature of this business. This fact alone, combined with the various methods for defeating the latest anti-counterfeiting technologies, makes it fairly obvious that the escalating counterfeiting of electronic components will not be subsiding anytime soon.
Several of the papers I have read indicated that the best way to avoid receiving products traveling through the illicit supply chain is to not buy from independent distributors. Ask your distributor to describe for you its anti-counterfeiting practices before purchasing any products from it. For ICs, black-topping -- the practice of removing original markings and remarking parts -- is fairly easy to detect with an acetone application that removes the top-layer marking, thus revealing any anomalies in the package surface itself.
But here is the shocker: I am a component engineer with a significant materials background, and, from time-to-time, I purchase large quantities of components at the behest of a consulting client. Sometimes the first few 100 parts and last 100 on a reel are the genuine, un-doctored parts, while the bulk of the reel contains the counterfeits. The reel itself and all the labeling are counterfeit as well.
The level of sophistication of a highly organized and operated counterfeit operation is daunting. Think about the fact that Apple Inc. (Nasdaq: AAPL) is closing entire cloned Apple stores in China where even some of the employees being let go thought they had been hired by Apple. That has got to be the knock-off coup of the century.
In subsequent articles, I will keep you posted on the latest anti-counterfeiting technologies. There are technologists working around the clock addressing this issue. New laboratories are being created with materials scientists exploring methods for detection and authentication processes that, if scalable to rapid, mass identification techniques, will at lease help prevent the counterfeit parts from being used on any new products.
That is to say, the counterfeit business, like the drug war, is not going to stop entirely, but the war is definitely on. I will try to get you, the reader, as close to the technology front as possible.