Counterfeit components: Methods to protect against fake
parts
Introduction: Imagine the incidents such as an aircraft
failing when in the air with boarded passengers, the medical
equipment blurs off in the middle of the surgery, the missile
misses the target and hits the own camp and a heavily invested
satellite fails reaching its destiny. One of the reason
for these incidents is fake parts otherwise called counterfeit
part/component used in them. The amount of loss and tragedy
caused by such duplicate components is huge. The fake semiconductor
chips and other electronic components are posing great challenges
to the world as they have created major threat to safety,
security, quality, reliability, and profitability.
The semiconductor IC parts and other electronic components
need to checked throghly before purchasing them. This article
educates you in buying authentic components and semiconductor
chips. You will learn how the counterfeits arise, their
impact and how to prevent them.
As the usage of electronic devices and equipments has increased
enormously, the cost and technology of components have also
varied accordingly. There is always a factor of the components
becoming obsolete, expensive or hard to find due to various
reasons such as demand fall, excess inventory, competitor's
upper hand, technology outdates, and so on. Using the internet
to surf through the grey market to procure the components
is vastly utilized by many companies to meet their demands.
Few technology-aware groups have started supplying the required
components using the short-cut methods by violating the
land rules. These components may not meet the standard specifications.
Such components predominantly relate to the obsolete or
long-lead time components with a unit price below 10$.
The copycat of the original component introduced in to the
market that may or may not function as intended for is termed
as a fake or a counterfeit part. Counterfeit is a substitute
or an unauthorized component produced without the notice
of the original manufacturer. The counterfeiter misrepresents
the original supplier. Due to huge profits, the counterfeiters
are found in many application domains. Counterfeits have
even entered the defense/aerospace industry and medical
applications.
According to Fairchild the counterfeit problem will continue
growing as long as it's profitable. "It's like the
drug problem. As long as you have people willing to buy
it, and the profit margin is there, there will be people
willing to sell it".
You may ask whether there is a particular category of components
affected by counterfeit. The answer is simple "no",
counterfeiters have chosen all commodities of electronics,
right from capacitors to diodes to memory chips to microprocessor
ICs. Counterfeiters are also improving their technique and
expertise up to an extent of successfully duplicating a
company itself. Technology now exists to optically copy
semiconductors and make a layout design at lower cost than
using previous technology. The range and the volume of counterfeit
components are expected to further increase in the future.
The cloned components are discovered in a number of ways,
sometimes customers return the excess inventory where portion
(labels, etc.,) of these original components are utilized
to fake the counterfeit components. In one of the cases,
the failed component in terms of electrical specifications
failure from a customer was returned to the original manufacturer
and it was found that the component was not made by the
original manufacturer. The obsolescence of critical components
still in demand is faked most.
The parts recovered from salvaged electronics waste which
are non-functional are processed by the counterfeiters to
give a look of an original component. The fakers remove
the components from a board. Then the solder and package
is cleaned up to give the new look. Such parts can be caught
during the initial visual inspection or during the basic
tests or board-level tests. Of course such fake components
which are non-functional in nature cause delay in the schedule
of the product launch.
The cloned parts which are functional in nature create more
risks and utmost care should be taken with such components
during all the stages of visual and functional testing.
There are wide varieties of cases encountered and for each
case, the testing methodology varies. For example, the package
condition and ink markings on the counterfeits are just
as similar to the original. Except for few parametric tests,
the fake part passes the other basic functional tests. It
becomes so difficult to identify and distinguish the original
with the fake components as counterfeiters are becoming
the masters of device substitutions. These fake parts are
sold in secondary market. So, buying a part in the secondary
market is always a risk and hence whoever chooses secondary
market should use the best inspection and test methods to
reduce the risk and impact.
In multinational organisation, there is a success story
about how they tracked the source of a counterfeit component.
A component from a reputed manufacturer had failed in the
field and when investigated with the responsible representatives
from design, sourcing, supply chain and the distributor/supplier,
everyone was performing their task in the same way as before
for many years and never had encountered any issue so far.
During the investigation, the sourcing representative had
disclosed a bit of information that he, as usually, had
contacted Mr.X of the reputed distributor/supplier for procuring
the components. Mr.X had already left the company a while
ago, and was engaged with the counterfeiters. So, taking
it by granted, the sourcing representative had bought the
components from Mr.X, an ex-employee of a reputed supplier.
Here, the biggest un-noticed fact is that the reputation
of Mr.X was taken for granted and the entire episode had
evolved. So, the lesson learnt here is that even though
we are good at business relationship and reputations, there
are chances of getting faked. So, a habit should be developed
by the representatives involved in supply chain and distributor/supplier
to update and communicate their correct contact details
on a timely basis.
Remember the below points while identifying the counterfeits.
1. Devices or components made out of copyright infringement
2. Stolen masks and designs used to manufacture products
in un-authorised factories or locations
3. Parts may not be electrically tested but physically looks
similar to original components
4. Components without die or wires inside
5. Manufactured with non-RoHS substances but marked as RoHS-compliant
or vice versa
6. Certificates of Conformances (CoCs) claiming higher performances
7. Re-marked components which are actually de-soldered from
recycle bins
8. Wrong date codes and markings on components so as to
deceive easily
9. Parts with dual marking such as ink marking stamped over
the laser etching
10. Ex-employees engaged with distributors or 3rd party
vendors to channelize the
counterfeit sales
11. Some of the broker organisations and distributors, which
are small in size, and
are non-franchised might be supplying counterfeit components.
What the counterfeit components can do to a business?
1. Unexpected losses occur due to the failure of systems,
devices and applications that can
cause severe damage to people and environment.
2. The presence of counterfeit components definitely increases
warranty costs and so the
maintenance costs.
3. Extra cost incurred right from supply chain's component
sourcing/procurement, storing, testing,
manufacturing, and servicing will increase
thereby the profitability goes down.
4. Customer satisfaction factor take a nose dive, retaining
the customers will become
difficult for affected companies.
5. The expected life of the product decreases as well as
the cost of each individual
product increases.
The impacts of the counterfeit components are:
1. The affected products are returned by the customers
and the company is viable
for all the penalties and overheads.
2. Creates undesirable quality issues and reliability failures,
thus causing heavy damages to life,
property and devices.
3. The production plant is adversely affected even up to
an extent of production line
stoppages.
4. Losing out to competition and drop in revenues in the
market due to the delay in the product
launch.
5. Business relationship within supply chain damages severely
and hence gives room for disputes
and legal actions.
6. Operations and process gets disrupted causing financial
losses.
7. The reputation and the brand value of the product and
the company are hit directly. Very
high efforts are required and the task remains extremely
difficult to comeback in the business
after once affected.
8. The safety and legal liabilities are imposed on the product,
which adds to the production
costs.
9. Losing out contracts as well as the compliance claims
get weakened, thus creating a huge
threat to the customers, company and the business.
What factors provide opportunities for counterfeiters?
1. The main reason that stands out is the enormous profits
that the counterfeiters avail.
2. The source shortages and limited availability of critical
components causes the demand increase
and hence fake parts gets in to the market to meet such
demands.
3. Single-sourced and hard-to-find components are the biggest
drivers of counterfeits.
4. Obsolete or EOL items with Last Time Buy (LTB) date passed
many years ago.
5. Urgency in releasing the NPI to the market due to various
business reasons and hence procuring
the components in unauthorized sources and grey markets.
6. Business in the grey market to satisfy the budgetary
constraints; but grey market components
aren't always necessarily counterfeits.
7. The green or environmental compliance regulations such
as RoHS, REACH, etc., create demand
for non-RoHS components for use in applications which are
exempted from these regulations.
Counteract to make the inventory and supply chain free
from counterfeits:
The uncertain and unstable market today in addition to the
risks posed by counterfeits, obsolescence and coping up
with the technology advancements is the real challenge to
be faced by the companies today. Combating against the fake
parts is very much essential to protect the company's supply
chain, the products and the brand image. Few general tips
are presented below:
1. First precaution is to control the source and the inventory
(the "supply chain") - by properly maintaining,
updating and reviewing the information as said in the introductory
module.
2. Keep a better watch on life cycle of each component.
Be ready with multiple alternate components and sources
in case of the component nearing to its end-of-life (EOL).
In case of single-source components, better have enough
stock in-hand, even though it adds to the sleeping budget.
3. Prefer purchasing the components from the manufacturer
directly as much as possible. If it is not viable, then
approach the franchised distributors and qualified independent
distributors. Proactively, get the contact details and addresses
of the distributors from the original manufacturer directly
or get them confirmed. Maintaining and assessing the potential
suppliers can help a lot.
4. Adopt a thorough screening of components and perform
inspections with sophisticated instruments like X-ray fluorescence
(XRF), digital X-ray instruments, microscopes, etc., for
destructive of non-destructive methods. After all, "it's
better and smarter to prevent than repair…!"
5. Check for the unnatural language, logos, fonts of the
printed text, layout of the information, and compare the
product information against the original purchase order.
6. Gather, update and store what codes (marking, lot, date,
shipment, bar, serial, etc.,) are to be inspected and confirmed
them from each supplier/distributor independently. Even
though the extra time is consumed here, it saves a lot of
time in the next stages and more importantly the customers
and the brand image are not hit.
7. Implement tracking system inside the supply chain such
that every component is traced back to their purchase history,
representatives involved and the date stamp.
8. Look for distributor's/supplier's certification, their
revenue and history. Probably the preferred supplier's list,
if maintained, can provide more details and pointers to
scrutinize the authenticity.
9. If feasible, subscribe to the industry's available databases
who maintain the overall reports and cases of counterfeits.
10. Implement stronger purchasing contracts that specifically
deal with the clause for counterfeits and making the suppliers
viable for product impoundment and financial losses.
11. Report the counterfeits to other buyers, stakeholders
and criminal investigation authorities (GIDEP, ERAI). Do
not return the counterfeit components to the seller.
In a nut shell, the companies can form a team comprised
of members from every department to drive the organisational
level plan and strategy. Also, the team should be equipped
with better trainings and awareness. It's not one team's
responsibility, because each sector of the supply chain
faces a different crisis and situations and a best practise
can be shared and implemented across the entire organisation
effectively.
Industry study reports:
1. According to IHS iSuppli report, the Top-5 most faked
semiconductors in 2011 (percentage of fake part reports)
are:
2. From original equipment manufacturers (OEMs) to contract
manufacturers and from component suppliers to component
buyers, the supply chain participants in 2011 reported 1363
separate verified fake-part incidents worldwide, says IHS.
3. The worst offenders by supply chain segment, as reported
in an OCM survey are, brokers (50%), independent distributors
(45%), internet exclusive sources (36%), individuals (26%),
authorized distributors (21%), contract manufacturers (12%),
OEMs and others (10% each), Subcontractors (5%) and Component
manufacturers (2%).
4. The OCM survey also presented, the China tops the list
with 42 sources of suspected counterfeits followed by Taiwan
(10), Philippines (8), Malaysia (7), India (7), Russia (6),
Indonesia (5), Vietnam (4), South Korea (4) and others (18).
Author:
S Jaya Kumar, Consultant, Component Supply Chain Management
Conatct
him at:
Find below links to other parts of
the article on the same subject of smart component sourcing:
Part1:Smart
component sourcing is about green, clean, rugged, and the
$:The basics of
modern component buying methodologies are explained in these
series of articles.
Part3:
Green Component Sourcing through environment conscious part
selection:: Selecting
electronic components causing no/least harmful to environment
Part4:
Electronics component supplier and device selection guide:
Evaluation and selection of semiconductor IC chips and other
parts and their suppliers
Part
5: The principles and process of electronic component selection:
Component Selection; "an art" for SMART and cost-effective
designs
Part
6: Electronic components Life Cycle management:
Methods to manage sourcing issues of obsolete components
