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Countering Counterfeits

Counterfeiting is a major problem for the electronics industry. That much is well known and acknowledged by everyone with a stake in the market. The good news is that the industry has been taking steps to combat the problem with some success.

As mentioned in our previous post, Kristal Snyder and the Electronic Resellers Association International (ERAI) recently held a conference in Las Vegas that revolved completely around detecting, avoiding, and mitigating the effects of counterfeit components. (See: Don’t Blame Independent Distributors Alone for Fake Parts, Part 1 and Don’t Blame Independent Distributors Alone for Fake Parts, Part 2.)

The ERAI is a global service organization that monitors, investigates, and reports issues affecting the supply chain. This year's conference was one of the best attended in years, and the general conclusion from participants I spoke with was that it was chock full of great information. Many attendees came hungry for knowledge on how to avoid counterfeits and set themselves apart from the “bad” distributors out there. This was very refreshing and disproves the theory that independent distributors simply don't care about the issue of counterfeiting.

Here are some of the highlights from the ERAI Conference and actions being contemplated or already introduced to help independent distributors fight the spread of counterfeit products:

  • G19 Committee.
  • Phil Zulueta, chairman of the G19 Counterfeit Electronic Components Committee, led the drafting of the AS5553 standard for detecting and avoiding counterfeit components. This standard was adopted by NASA in 2008 and by the US Department of Defense, and it became an SAE Standard in 2009. The new AS6081 standard is currently under way, specifically intended for independent distributors, and it's very similar to the AS5553 but contains prescriptive counterfeit parts avoidance requirements.

    A dream team of representatives from the major players in the electronics industry has come together to support Zulueta in drafting this standard. Completion of the AS6081 standard is expected by the end of 2011 so that independent distributors will be able to have compliance verified through a third-party certification body, and OEMs with the AS5553 standard in place will be able to flow the requirement down to their distributors. The scope of the standard includes risk mitigation through a control plan, component testing and verification, and enhancing the process with counterfeit focus. More information on this standard is available on the SAE site.

  • Make it legal; counterfeit parts won't be returned.
  • One other informative speaker at the ERAI event was Keith Gregory, litigation partner at Greenberg & Bass LLP, and a long-standing general counsel for the ERAI, who is well versed in the legalities of the electronics industry. He told independents to put this wording in their purchasing terms and conditions: “Counterfeits parts have no value.” It's a very simple statement, but it can be effective in voiding transactions where components are suspected to be counterfeit.

    Many distributors want to do the right thing by confiscating the suspected counterfeit materials so that these don't end up back in the supply chain. However, without the proper wording in purchasing terms, the fear is that there could be legal ramifications for not fulfilling the payment side of a purchasing agreement. Gregory assured the ERAI conference participants that a company can legally confiscate the parts when there is a preponderance of evidence that they are fake and the proper wording is already included in the purchasing agreements. In a case when parts are quarantined, the burden of proof would then be on the seller of the components to prove that the parts are not, in fact, counterfeit, via testing at a third-party lab.

  • Moving beyond the visual testing standard.
  • Debra Eggeman, executive director of Independent Distributors of Electronics Association (IDEA), a non-profit organization for advancing industry ethics, establishing standards, and promoting education in the industry, was also in attendance with her team. She noted that the IDEA-STD-1010-A standard for visually inspecting components was first released in 2006 and has been widely adopted as industry standard for inspecting components.

    The newest revision to this standard the IDEA-STD-1010-B was just released in June and includes some major redesign to coincide with changes in the industry. The update will address changes in techniques used by counterfeiters, the need to look beyond visual inspection, the use of test houses, making the standard more visual and less wordy, and the discussion of advanced inspection techniques.

In a subsequent blog, I will discuss and offer practical suggestions for detecting and helping the industry fight the problem of counterfeiting.

24 comments on “Countering Counterfeits

  1. HM
    July 18, 2011

    I have seen people using counterfeit clothing,watches etc. Counterfeit electronic components is really something that signals the limits which this grey industry has reached. I think there will be an ecosystem that supports growth of counterfeit components.

  2. Nemos
    July 18, 2011

    Very nice title .Having in my mind your latest post with title Don't Blame Independent Distributors Alone for Fake Parts, Part 1

    I want to note that the above suggestions are in the right direction against counterfeits, and also they will help the independents' distributors to clear their names from the charges. However, if we want to clear the situation we have to take only one action. We must fight the problem to the source, and the source is the gap in the recycle chain of electronic industry.

  3. JADEN
    July 19, 2011

    The focus of this topic should be more on the root source of counterfeiting at the manufacturing level which include; engineering drafting and design, testing method and reliability, production materials, and technology involve in the production.

  4. prabhakar_deosthali
    July 19, 2011

    Like the counterfeit currency notes , to differentiate a counterfeit part from an original one is a tough and expensive task. What we need is better techniques to mark the parts as original using some kind of Holographic or laser techniques. If at any point in the supply chain , we are able to detect the counterfeit from the original by automatic scanning , then this menace can be automatically curbed.

     

    Again in the repair shops we cannot control the use of counterfeits by the service people as the end customer may not be equipped to find out whether the replace part is a genuine or a fake.  This requires some control and random by the legal authorities .

  5. Dawn Gluskin
    July 19, 2011

    Nemos – You are correct that eliminating the source of the counterfeits (e-waste) would have some effect on reducing counterfeits, and I believe some measures have been taken to regulate that industry.  However, it will likely take much time to see any results from that, and to a certain extent, we've got to believe that counterfeiters will always find a way.  Following best practices, avoiding bad vendors, and testing components, for now, is the only way.

     


  6. Dawn Gluskin
    July 19, 2011

    prabhakar_deosthali – That is an interesting theory.  I've seen other discussions on some of marking that is counterfeit proof.  I'd like to see something like that develop,  Again, it would take many years to implement and see any effects from it, but it would be a step in the right direction.

    Thanks again to everybody for thier feedback on this blog series!


  7. jbond
    July 19, 2011

    This was a great post and I look forward to your next follow up. It would seem like that conference had some very valuable information. I particularly like the bit on adding the line of “counterfeit parts have no value”. This one little line could save companies large amounts of money, and allow them to keep these counterfeits out of the supply chain. It seems like everybody is out to make money regardless of legalities, at least there is some good information out there to try and prevent these counterfeits from hitting the streets and at the same time protect the companies trying to stop it. 

  8. Adeniji Kayode
    July 19, 2011

    I think many environmental and economic conditions are already a major support for counterfeits components.

    They are cheaper and sometimes readily available when compared to the original components

  9. Adeniji Kayode
    July 19, 2011

    IS it really possible to stop counterfeit materials when several conditions around us support them.

    Moreover, the existance of a counterfeit item means there is an original somewhere.

    If the original never exist, then there would be no counterfeit

  10. Adeniji Kayode
    July 19, 2011

    we've got to believe that counterfeiters will always find a way.

    This is an  important statement you made  and I totally agree with you. Much more than some of the points you listed here to control counterfeit materials, economic condition plays a major role and as long as this remain-to some extend, we will always have counterfeit products around. 

  11. Taimoor Zubar
    July 19, 2011

    I totally agree with these comments. Manufacturers will only produce something when demand for it exists in the market. As Adeniji mentioned, lower prices are the major reason why counterfeit products are in demand and hence are being produced. Despite the legal restrictions, manufacturers will eventually find a way to make and sell counterfeit products.

    Perhaps what companies can do is to start catering to the segment of the market which wants lower priced products and goes for counterfeits. Companies can produce a lower-end (may be slightly inferior in quality) product and sell it at a cheaper price to compete with counterfeit manufacturers. This is one way to drive them out of the market.

  12. garyk
    July 19, 2011

    Some of the comments being made sound like people don't understand counterfiet parts. These are counterfiet electronic componets not purses or golf clubs. These componets have the same marking or company logo's as the orginal manufacturer. If the components are from a non approved manufacturer or have a non approved manufacturers logo they should not be be purchased, these units should meet the MIL Specification DWG marking requirements, period, no questions asked.

    Somebody said, manufactures should manfacturer a cheaper part to put the countfieter out of business, this person doesn't know what he is talking about! If the customer wanted a COTS part, they would have ordered one. Manufacterers already manufacturer commerial parts that meet MIL Spec. less the reliability Testing.

    There should be a HOT Line to report counterfiet parts!!! This would be a start to put the counterfieter out business.

  13. Kunmi
    July 19, 2011

    Every product that are certified meeting the specifications and that are approved to be produced and marketed have assigned recognition codes. In order to limit or eradicate the counterfeits, there must be a task force who will keep eye on such a product and have a data bank where the consumer will be able to report their experiences. This will allow the task force filter the genuine from counterfeit. Though it is very unlikely that adulterated materials will seize from existing but it can be limited.

  14. Adeniji Kayode
    July 20, 2011

    I agree with you Taimoorz. It will be a good thing if manufacturers can do that.

    In so doing, they will be able to protect their products and preserve their names and intergrity.

  15. Adeniji Kayode
    July 20, 2011

    I agree with you Taimoorz. It will be a good thing if manufacturers can do that.

    In so doing, they will be able to protect their products and preserve their names and intergrity.

  16. Adeniji Kayode
    July 20, 2011

    Let me ask you a question garyk, what do you think is the origin of counterfeit parts you are talking about, what is the motivation behind it.

    Why do you think counterfeit parts are in circulation despite the originals

  17. Adeniji Kayode
    July 20, 2011

    you made a good point there Kunmi, efforts can be made to limit the spread of counterfeit parts not that can only reduce it but can not stop it outrightly.

  18. garyk
    July 20, 2011

    My guess is the primary source for counterfiet parts comes from CHINA. They are one of the only counties that purchase re-claim/scrap elctronronis. They do have millions people keep working at very low wages.

    MIL Specification parts are expensive and some have long lead times because Reliability Testing  that is required.

    Where do you think conterfiet parts or units come from?

    There have beem stories about Jet Fighter engine rubber “O” rings being made from wind shield wiper rubber, made in CHINA, and sold in the US. (We need a HOT Line to call)

    For more information on counterfiet parts goggle electronic counterfiet parts, other publications Military & Aerospace Electronics, SMT Weekly Newsletters, Calce/eNews.

  19. Mr. Roques
    July 22, 2011

    The counterfeit problem should be seen at a national level and be able to create treaties with the main manufacturers to try to solve the problem. Although I'm sure China isn't willing to commit.

  20. Adeniji Kayode
    July 23, 2011

    Well, the China of today is not likely to do that afterall that has been the a means by which China has been sustaining her economy.

    I feel they have gain ground though, so i expect then to upgrade and start manufacturing a more quality parts

  21. stanleyy
    July 24, 2011

    We need something to minimize the risk from products being counterfeited and shut the door upon 99% of counterfeiters (hopefully) while as a layman without technical knowledge to differentiate real from fake. 

    So far, in hologram industry HGT Deep 3D hologram technology (http://www.hgt-global.com) can fulfil these requirements.  As far as existing technology in the world, the counterfeiting risk on this type of hologram is Zero.

    To apply a banknote technology on label form, the most advanced and traceability security features are to embed a security thread on the label (http://hgt-global.com/security_paper.html).  The quantified risk is equal banknote being conterfeited.

  22. Dawn Gluskin
    July 26, 2011

    Thank you again for all of your fantastic feedback!  Some excellent points have been made.  Anybody with additional questions, I invite you to please join us this Thursday, July 28th, at 12:00 EST as I do a LIVE CHAT Dialogue with EBN users!  Click the LIVE CHAT link on the front page to add it to your calendars.  I look forward to answering any questions you may have.  Thanks again for all of your feedback!

     

    LIVE CHAT with Dawn Gluskin

    What You Really Need to Know About the Open Market

    “Not all non-franchised distributors are created equal. Many companies that play in the open (non-authorized) distribution market have gone to great lengths to ensure that the components they sell are counterfeit-free. In this Live Chat, Dawn Gluskin, founder and CEO of distributor SolTec Electronics, will talk about what differentiates these companies from unscrupulous open-market brokers.”

    Add this event to your calendar.

  23. Mr. Roques
    August 30, 2011

    Well, China started out that way but right now, they have a legit business model and they wouldn't want to see that go somewhere else because of the counterfeit issue getting out of hands.

    China, officially, has to defend the legit businesses, even if they, behind closed doors, support counterfeit.

  24. electronics862
    August 31, 2011

    The only way to prevent counterfeit products is by targetting the people who is manufacturing and bringing them to market..

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