Are Counterfeit Components Really a Problem?

By Tony Hilvers, IPC Vice President of Industry Programs
Periodically, an industry publication will breathlessly report a story about the incredible cost of counterfeit components. It’s very exciting news.

For example, according to an IHS ISupply study, “The risks of counterfeit semiconductors are both financially high and potentially fatal. The components represent $169 billion in potential annual risk for the global electronics business.” And recently Bolaji Ojo, editor and chief of EBN, reported on “the 5 most counterfeited parts.”

I don’t want to minimize the problem but I do want to point out there is a straightforward solution for most companies. The solution is to buy from franchised distributors or direct from the component manufacturer. Yes, it is truly that easy to stop counterfeits.

I’ve seen story after story outlining the costs of counterfeit components. For once, let’s define the solution to this problem simply as “buy from a reputable source.” Like the old saw “if it’s too good to be true, it probably is.”

Oh but companies shop the “gray” market to save money. That’s like buying a designer handbag from an internet site for 60 percent off the original cost. Do you really think you’re getting the designer’s product? That’s like buying a high end luxury watch from a street vendor. It’s fun to look at but becomes a waste of money when it stops working. I could go on with the analogies but you know you get what you pay for and this doubly applies to the gray market for components. You are taking a real risk.

But, you say you have to source your components on the “gray” market. The component you need is no longer manufactured and your distributor doesn’t stock the component. This is not usually a problem for most electronics manufacturers. It is, however, a significant and critical issue for military and aerospace companies.

Why are there counterfeit components in the first place? Because someone buys them! The conventional wisdom is that most counterfeit components are very good; some are almost undetectable. In fact, some are original components removed from the assembly (let’s be kind and say their removal is not to any specification) or are scrap products. In both cases, there are unknown effects on reliability.

There are countless ways counterfeit components enter the market. We can petition governments, beef up customs, call out known violators, and shut down websites to try to stop the problem. IPC even developed a counterfeit tool kit for assembly equipment manufacturers to use to combat counterfeit parts. But I believe that counterfeit components will continue to enter the market. Until everyone stops buying them (like those luxury $25 knock-off watches), counterfeits will continue to be manufactured and sold.

So what do you do when you need a component that is no longer sold by the manufacturer or stocked by the distributor? Go to a source that will validate the chain of custody?

That’s one answer. How about redesigning the assembly to incorporate a new, available component – one from the manufacturer or the franchised distributor? Yes, this process certainly costs money and time to re-qualify the component. But to get a reliable product, isn’t worth it? To know you aren’t playing Russian roulette with your product especially if that product plays a vital role in protecting the warfighter?

So let’s stop developing data on counterfeit components; stop developing schemes to try and validate parts — just stop buying parts with questionable provenance. I think it’s worth it to buy the original. Don’t you?

14 Comments

  1. Guest
    Posted April 30, 2012 at 2:08 am | Permalink

    Easier said that done. Sounds like your trying to preach to the choir. Buyers are already aware of these facts. Of course you would buy franchised if you could. Thats not the point.

    Truth is its component obsolescence which is the main cause of counterfeiting. There is no industry wide notification system in place so many OEM’s are left with essential lines going obsolete and with no other source for them they literally have no choice.

    You should certainly vet your independent distributors and look for ISO certificates as well as proven quality procedures. Statements such as “just stop buying parts with questionable provenance” are ridiculous. I’m sure they would if they could.

  2. Anonymous
    Posted April 30, 2012 at 7:51 am | Permalink

    I agree. Yes, obsolete parts are a problem especially when OEM and EMS companies have little time to respond to obsolete part notices because of inefficient communications in the supply chain. IPC is working with NEDA (National Electronic Distributors Association) and the EIAC (passive components) on a communications guideline for obsolete parts to help solve this problem. However, I still maintain that redesign is preferable to parts of questionable provenance… especially to save money.

    Tony Hilvers, IPC

  3. Posted April 30, 2012 at 10:28 am | Permalink

    I agree easier said that done. The Franchise and OCM’s accept RMA components..its very possible that counterfeit parts enter into the supply chain thru that door.

    • Andara
      Posted April 30, 2012 at 10:38 am | Permalink

      Counterfeit components absolutely do enter the supply chain through the RMA system.

      I was the recipient of a counterfeit piece of software that looked completely legitimate upon inspection, having come in a properly sealed case. It wasn’t until it didn’t function that it was seen to be a high-quality stand-in.

      Fortunately, the person responsible was merely a thief and not malicious, as there could have been anything on that disk.

  4. Anonymous
    Posted April 30, 2012 at 10:35 am | Permalink

    “So let’s stop developing data on counterfeit components…”

    Okay, then follow your own advice.
    You’ve issued alarming data on counterfeits yourself.
    If this is a problem, stop issuing releases like this:

    IPC Surface Mount Equipment Manufacturers Association Council Issues Advisory on Counterfeit and Inferior Parts and Unlicensed Software

    BANNOCKBURN, Ill., USA, June 15, 2011 — Counterfeit products are reported to have grown to a $600 billion business worldwide. The electronics assembly industry has been impacted, with reports of counterfeit feeders, spare parts and software causing equipment breakdowns and production delays. To assist IPC member companies in keeping their equipment and lines running, the Surface Mount Equipment Manufacturers Association (SMEMA) Council of IPC – Association Connecting Electronics Industries® is creating an “anti-counterfeit tool kit.” The first item in the tool kit is an advisory statement to customers to use only authorized channels for replacement parts and service, and reads:

    • Tony Hilvers
      Posted May 1, 2012 at 7:54 am | Permalink

      O.K. you got me. Yes I did originate the press release using counterfeit data to create awareness and of course press pickup. Guilty as charged but I had good intentions. The release described the plight of equipment manufacturers in confronting counterfeit parts for their equipment. But here is where I was consistent in both the news release and the editorial: If you want the original, buy from the manufacturer or an authorized distributor.

  5. Posted April 30, 2012 at 10:54 am | Permalink

    I deal with the obsolete parts issues constantly and we are involved in commercial product only. In my minds eye some manufacturers should rethink obsoleting parts and turn it into a profit center. I would gladly pay more for the genuine article and the ability to hold the supplier accountable. I’m confident some bean counter out there can demonstrate a path to profitabilty by engaging in such a business.

  6. Posted April 30, 2012 at 5:58 pm | Permalink

    I could not agree more..

    I would add that if you do buy from a non-franchised source, make sure that you ask them for their track record. Their inspection and test equipment and references may not be a sufficient indicator..And yes, it is always better to redesign and requalify, you never know, there are few legacy product manufacturers out there..

  7. Bill Pulcine
    Posted May 1, 2012 at 5:52 am | Permalink

    What about the elephants in the room?

    1. Exaggerated columnar pricing from the semiconductor manufacturers and franchised channels that virtually guarantee that there will be gray market.
    2. Unwillingness to take back unused parts (by the same parties).

    Fine to say “buy from the originator or their franchised partners”. These parties could virtually eliminate the gray market for non-obsolete parts with some behavioural changes of their own.

  8. Posted May 1, 2012 at 9:22 am | Permalink

    What if there was a method of removing ICs from scrap assemblies safely? Would this make a difference? If you could recycle known good ICs (i.e. brand new from a manufacturing line but on a failed pcb, would this be a solution?

  9. Posted May 1, 2012 at 1:53 pm | Permalink

    Counterfeit parts do enter the licit supply chain when OEM RFID tags are cloned or when there is a 1:1 swap of container contents while not disturbing the original RFID tag. I completely agree that buying from franchised distributors will get you 90% of the way towards assurance, but it is the last 10% that is of the greatest concern. When counterfeiters have sophisticated operations, they clone reels, tapes, and labels, and not just components. The first and last 100 parts on a 3000 piece SOIC-8 reel may be OEM product, but if the reel has been spliced or loaded with bogus parts after the lead components have been verified, then this is a major concern. My advice is to keep yours eyes and your mind open.

  10. Matt
    Posted May 1, 2012 at 7:15 pm | Permalink

    would like to have a discussion with you about an idea I am currently working on. I have been in the semi business for over 30 years and your answer about buying from the source direct has merit obviously it is just not always realisticthe problem goes deeper and does effect the direct and franchised sources as well. Email me so we can discuss.

  11. Posted May 7, 2012 at 12:44 pm | Permalink

    Hi Tony,

    If this was a perfect world, the idea of only purchasing new stock and the re-design of frozen military technology is IDEAL. However in the real world this is not an option for many reasons. The costs are not just a bit more or an easy logistical fix. We would run into billions and possibly trillions of dollars for a modification as you suggest. The Government is not willing to fork out the cost; the logistics of it all would be monumental. As a prime example, after sixty (60) years, the US Air Force still has in service a piece of Military Equipment well known as the B-52 bomber, it’s said it will fly well into the year 2040, it’s old technology is not going to go away, to replace/re-design it all would be prohibitive, it’s just NOT in the cards. Therefore, using the B-52 as an example and hundreds more in the wings, your article; “Are Counterfeit Components Really a Problem?” to that I’ll answer with 36 years of EMS experience and 10 years experience directly as a DOD Supplier Quality Engineer, Consultant/Instructor/Course Director in the detection/prevention and risk mitigation of counterfeit components the answer is quite SIMPLE…”YES INDEED” they are.


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