How safe is the open market these days? US Customs' seizures of counterfeit products are skyrocketing, thanks to enhanced enforcement on our nation’s borders and increased industry awareness. However, the fact that seizures are up is just the tip of the iceberg: It is, at the same time, a reflection on a growing problem within our industry.
Many brokers would like buyers, in the words of the Wizard of Oz, to “pay no attention to that man behind the curtain.” In fact, customers should be paying more attention than ever. Chinese suppliers have set up networks of local sales offices in Canada, California, Florida, the UK, and Poland, just to name a few — and they're offering “new and unused” parts, which, unfortunately, don't always have the same level of quality as US semiconductor professionals expect. Far too many brokers are offering products that are not traceable — products for which they in fact do not know the source, nor do they have the tools to properly inspect.
The greed of many brokers is, unfortunately, contributing to the counterfeiting problem. Time and again we see brokers offering “new and unused” parts, which they claim are from “OEM stock,” only to have them confirm a “5- to 7-day lead-time,” or to read about a “30-day warranty” limitation in the fine print of the order confirmation or invoice. Both of these are warning signs that the seller has no provenance on the parts they are selling, and you may not be getting what you expect. In the spirit of fair play, it is a cheap shot to try and hide such limited warranty details in the fine print of an invoice; brokers know full well that many of these documents go straight to the accounting team for payment and are not seen by the buyers.
In times of allocation, or, worse yet, in the wake of a natural disaster like the one that has affected the Japanese supply chain, many companies do in fact need to access the open market in order to meet production schedules and customer commitments. When a franchised distributor lets a customer down, as will happen from time to time, buyers need to take matters into their own hands in order to keep the production line running.
The open market is a wonderful thing, driven by the classic rules of supply and demand, but it can also be a demon. The question is, of course, how to access this market segment safely and to ensure that the products purchased are going to meet expectations.
Some OEMs have created their own industry groups, such as EXACT in Switzerland, in which purchasing managers exchange information about market conditions and product allocations. Other approaches, such as Virtual Chip Exchange, have brought together thousands of OEM customers from around the world to trade in their own private parts exchange — no brokers allowed. Some buyers try to rely solely on the prior success of their “approved broker” list, while still others prefer a full transparency approach — listing hundreds of China-based brokers on their Websites — caveat emptor (let the buyer beware).
In my opinion, the playing field is no longer level. There are far too many “behind-the-curtain” players who provide shady products into the US supply chain; even the most well-established brokers can become victims. What is needed is a commonsense approach to the problem, and that is something that each and every one of us can contribute to. At the end of the day, a $20 “Rolex” is never the real thing.