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Counterfeiting Hurts the High-Tech Supply Chain

Counterfeiting is not unique to semiconductors; in fact, it’s not even a new idea.

Counterfeit and substandard products enter the global supply chain every day and have a negative effect on many industries: money/currency, stamps, clothing/fashion, wine, toys, computer hardware and software, electronic devices, semiconductors… and I’m sure you can think of others.

Earlier this year, US electronics retailer Newegg confirmed that counterfeit Intel Core i7 920 CPUs had made their way into its inventory, and several had been shipped to customers. (See: Newegg Axes Supplier Over Fake Intel Chips.) The counterfeit Intel Core i7 920 CPUs, sold as standalone or boxed chips, had spelling errors on the box, a blank instruction manual, a heat sink made of epoxy or plastic molding, and a picture of a CPU fan glued to the top of the plastic heat sink! The CPU was comprised of layers of metal and PCB with a fake IHS on the top and a sticker attached with typical Core i7 information.

Not exactly the most sophisticated counterfeiting operation, and yet the counterfeit products passed through all of the testing and verification of authenticity procedures, only to land in the hands of end customers. With counterfeiting operations developing new and advanced techniques, it is alarming to see such a simplistic counterfeit scam work.

In coming months, I will be discussing in this column the global semiconductor supply chain, semiconductor manufacturing and distribution trends, end-of-life events, semiconductor counterfeiting and substandard procurement concerns, anti-counterfeiting measures and tactics, and what original semiconductor manufacturers, OEMs, and government agencies are doing to reduce illegitimate product from reaching the end user. I look forward to exchanging ideas with you and reporting on ways we can all work to improve the semiconductor industry.

10 comments on “Counterfeiting Hurts the High-Tech Supply Chain

  1. itguyphil
    October 11, 2010

    I heard of this story as well. I felt bad for Newegg since everyone will blame them for not being able to detect the fraudulent products. But I saw a few instances close to home where people were burned by counterfeit products. What's worse than NOT getting what you pay for is the additional damage that will be done to your other products. For instance, if you built your custom machine, a counterfeit CPU might cause harm to your other 'real' components.

  2. Ashu001
    October 11, 2010

    George,

    There is no disputing that Counterfeiting among Global Electronic Manufacturers (especially the most popular ones) is a very serious and growing menace.

    There are in (my opinion) two ways to tackle the problem-

    1)Make your products and the supply-chain more robust and difficult to duplicate

    and 2)Make your products cheap enough there is no incentive for a counterfeiter to counterfeit your products and under-cut you on price.

    Both these ideas will work wonders to eliminate this terrible problem (which could also put peoples lives at risk,through faulty products..).

    Regards

    Ashish.

  3. Barbara Jorgensen
    October 11, 2010

    I'd like to hear more about the inspection and verification procedures the Newegg chips passed. Here's why: inspection may not do a lot of good without comparison data–in other words, what does this thing look like vs. the original? I know of an organization that published a catalog of real vs. fake devices and I used to think that was awfully simplistic. Now I'm not so sure.

  4. tioluwa
    October 12, 2010

    now this is an issue that really touches me  and i look forward to it being handled on this page.

    The safety implications are enormous, not to mention to damage to the integrity of companies that have their products counterfeited.

     

  5. Steve Saunders
    October 12, 2010

    this doesn't say much for Newegg's inspectors!! Their should be some sort of watermark for electronics components imilar to what they have for brand sports equipment, but tiny. This seems like a problme with a solution to it for an industry as innovative as the electronics world 

  6. Steve Saunders
    October 12, 2010

    didn't the US Navy also get stung by counterfeiters recently? Anyone have a link to that story?

  7. bolaji ojo
    October 12, 2010

    Steve, The U.S. Navy was indeed stung by counterfeiters but it was not alone. The entire U.S. Department of Defense was impacted. In a report, the three military branches admitted to having seen their supply chain infiltrated by counterfeiters. The Navy bought counterfeit routers “that had high failure rates and the potential to shut down entire networks.” The Air Force said it bought microprocessors for its F-15 flight-control computer that turned out to be fake while the Army bought seatbelt parts “made from a grade of aluminum that was inferior to that specified in DoD's requirements.” The report is available here.

  8. Steve Saunders
    October 12, 2010

    Bolaji, that's incredible and certainly doesn't make me feel safer in my bed at night. What's next – fake parts for nuclear reactors in the US, or real ones for the reactors in Iran? (sorry, bit political)

  9. papri1
    October 18, 2010

    Counterfeiting occuring in the semiconductor industry not only invalidates authenticated products but also a decrease in buisness heights which lead to a loss for further rapid growth. This could be avoided only by watermarking and also using holograms. This could be developed in a semiconductor industry or could be imported from the concerned manufacturer who sells the products to retain the authentication of the valuable products in a semiconductor industry.

  10. Barbara Jorgensen
    October 20, 2010

    Sadly, the technology to not only identify counterfeits but keep them out of the channel exists. There are RFID tags, holograms and a number of other authentication technologies that are proven. They are still prohibitively expensive for the supply chain and there is another problem: everyone has to agree to use the same process or it's useless. Supplier A uses RFID and supplier B uses a hologram. Authorized distributor C has to invest in RFID and hologram scanning equipment–big bucks. Supplier E uses barcoding and so on…

    Now, another wrinkle: investment in scanning equipment differentiates C for awhile because they can say the products are authentic. But then nonauthorized distributor D also invests in the equipment and D can prove the parts are authentic too. What then differentiates Distributor C? A proprietary system is one answer, but that would require everyone in a single supply chain to agree to and use that technology. What if you have a mom and pop supplier that can't afford it? So we are back to the beginning.

    It boggles the mind.

     

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