by 
EPS News
News For Electronics Purchasing And The Supply Chain
Live Chat 8/15: Avoid the Counterfeit Trap
Hailey Lynne McKeefry has spent more than 28 years writing about technology and business. She began her career as an editor at such periodicals as Macintosh News, EBN, and Windows Magazine. After more than 16 years as a freelance journalist, she has written about a broad variety of technology topics, with a focus on supply chain, components, security, storage, healthcare, and SMBs. Living in the heart of the Silicon Valley, Hailey has written for many top business-to-business publications and Websites including EDN, EETimes, Information Week, CRN, eWeek, Channel Insider, Channel Pro, Redmond Channel Partner, Home Office Computing, and TechTarget. She graduated from the University of California at Santa Cruz with a BA in literature. Follow her on Twitter @HaileyMcK.
This site uses Akismet to reduce spam. Learn how your comment data is processed.
| Cookie | Duration | Description |
|---|---|---|
| cookielawinfo-checkbox-analytics | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics". |
| cookielawinfo-checkbox-functional | 11 months | The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". |
| cookielawinfo-checkbox-necessary | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary". |
| cookielawinfo-checkbox-others | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. |
| cookielawinfo-checkbox-performance | 11 months | This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance". |
| viewed_cookie_policy | 11 months | The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data. |
Hope to attend
It is important for everyone to follow process and there should not be so much of rush to order from mobile. If one does, they waste lots of money and half of items go waste. When it is spending money, following process is very important. This is also true for your home.
Hi everybody
Hi everybody, looking forward to an interesting discussion.
Greetings! Great topic. It's such a huge problem for so many industries today! look forward to the discussion
I think couterfeits will be there always and only thing is customers has to be vigilant about it.
Customers can select which ever they want, original or counterfeit.
Hello everybody
As for my knowledge, in the past SIA (Semiconductor Industrial Association) has been planning to issue their Standard with special requirements to manufacturers of components for counterfeit prevention. What is the situation now?
Lev Shapiro
Component Master Ltd.
Have to implement safeguards to ensure counterfeits cannot be introduced into design and manufacturing processes.
We will be starting at 11 a.m. PST/2p.m. EST sharp. First, though, there are two housekeeping notes:
First, please make a copy of your post before hitting the “post” button – just in case. If the system “eats” one of your carefully crafted thoughts, please hit “Ctrl-Z” to recover it.
Second, if you have problems posting, we suggest trying a different browser. IE9 is a popular choice, but sometimes find Firefox, Chrome, or Safari work better.
This will be a fun, fast, and friendly conversation, so please do not hold back with your comments or questions. There are no dumb questions and we value everyone's point of view.
And always, please announce your arrival so we can give you a warm EBN welcome and offer you some guacamole. 🙂
@ Hailey,
Good Morning….Steve from Components Direct is online
Great to have you with us, Steve. The questions are already flowing! From @Leve Shapiro:
As for my knowledge, in the past SIA (Semiconductor Industrial Association) has been planning to issue their Standard with special requirements to manufacturers of components for counterfeit prevention. What is the situation now?
wow! we started early here?
We'll be starting in earnest in a few minutes at the top of the hour.
This topic is so hot people can't help talking about it!
Since there are so many people already here, i thought i'd get us started just a minute early. Just to give us a good starting point @Steve, how would characterize the current counterfeit components landscape? How big ist he problem? What types of parts are most likely involved?
the problem is continuing to increase. According to the 2012 IHS report over 12 million counterfeit components were in the supply chain
57% of these components are obsolete or EOL
How is the components being obsolete contribute to the counterfeit problem?
Mark Pfutzenreuter from Odyssey Electronics, Inc is online. We are an Idependent Distributor sourcing on the open market.
The issue is becoming more highlighted – in a recent report by another publication, 87% of the respondents agreed that the danger of counterfeit components extended beyong military and aerospace markets
Glad to have you with us, Mark!
The fact that many of these parts are discontinued and harder to find the counterfeiter are trying to take advantage of the situation with little to no regulations in regions like Asia
John McKay form America II Electronics
Glad to have you with John, and welcome.
Which technologies are very useful to find counterfeit components?
Hi everyone, I was wondering if electronics manufacturers had a centralized website/database where they reported on the latest counterfeiting cases, so that industry folks could check brand name, serial numbers, etc?) It's hard to set this up, I know. But drug industry has set up something like this called Rx360….industry professionals volunteer their time to help run it!
and please feel free, all of you, to chime in with your personal experience with counterfeit components. We'd love to hear what you've encountered.
Welcome, MTS2013. glad to have you with us.
Thanks, so glad to be here! Was wondering too whether RFID or tagging was being used on the more expensive components.
@mts2013, you can go to http://www.Authorizeddirectory.com to post your latest counterfeit case. And you can also identify all of the authorized distributors for most semiconductor manufacturers worldwide.
@veera – i think it is across the board
there is no industry standard for the mfg but there are organizations like GIDEP and ERAI and IDEA
@mts2013, i know this isn't what you were asking about but the International Electrotechnical Commission Quality commissoin has launched a program. We wrote about it yesterday:
IECQ Launches Anticounterfeit Certification Program
ERAI also provides an online forum on its website via which ppl can report
@Steve, what industries/countries are most invovled or affected by counterfeit parts?
Great. Thanks. Are there any rules of thumb for recognizing counterfeit components? The bad actors are getting so slick and “good” at making things seem real.
@MTS2013 – it is being rolled out to certain mfg but not across the board i believe
Here's a link to the ERAI site steve mentioned: http://www.erai.com/information_sharing_high_risk_parts
Great. Thanks!
@Hailey – The Asia region appears to be due to lack of consistent regulations on this issue, as well as offshoring
It sounds like this group wants the nitty gritting of catching counterfeiters… to their points: What are the best tools and methods for spotting coutnerfeit parts?
Are most of the fake components coming from China, at this point? (This seems to be true in every other market…) We hear so much about government reforms, but probably shouldn't expect much change…has the Chinese govt made any public statements about attempting to stop this?
@Steve-Sure you have hit the Nail on the head with the Number of counterfeit components but you also can't disagree that simply embedding RFID chips/Tokens isnt gonna solve the issue.
I can get in and get out of any Database I want today and modify the Data according to my needs.WHat can Manufacturers do then?
@Steve, that's another side of having a global supply chain–the regulations and monitoring do differ dramatically from place to place.
Ongoing test and procedures within the organization is imperative – partnering up with key 3rd party test houses, understanding what to look for (blacktopping, remarketing, dimensional tests etc)
I have seen IC manufacturers disposing of silicone that is substandard in a careless manner that feeds the counterfeiter the raw materials to make product that is hard to trace. Surely crushing on site is the only safe way to dispose of silicone die. The wider industry needs to work together to win this fight. This should be the starting point.
@Tech4ppl – tightening their supply chain, ensuring no gaps, more transparency and work in collaboration with their distributors, oems and ems partners
Next both the USA and Europe need to handle their own waste properly instead of sending it to China, India, Nigeria etc.
also having a clear plan for how to deal with their excess and EOL parts is essential
@ComponentSense, getting to the very root of the problem seems reasonable. Why do you think semi manufacturers don't do this? IT seems like a simple thing.
@Hailey – yes you are right, regulations are not global
@Hailey – perhaps due to revenue recognition, once parts are sold they may not want to bring them back in
Hello, everyone!
@steve, you mentioned the importance of more transparency and work in collaboration with their distributors, oems and ems partners – did you mean Authorized Distributors? And to the whole group, what does authorized mean to you in terms of eliminating the counterfeit problem?
@Hospice_Houngbo, welcome. Glad to have you with us. Please chime in whenever you want.
@Steve-But what are you going to do when you realize the entire Supply Chain is dispersed all over the place?ITs not like eveyrthing is in one country/Region today is it?
And especially when you outsource?
This is not giving us easy answers is it?
@george – yes authorized distirbution, direct lineage to the mfg
@Hailay: THanks!
@Hailey-I am also very interesting in the recycling aspect of the Electronics Supply Chain.Not enough is being done(IMHO).
If the answer is to get to the root of the problem, it would be interesting to understand why and how all this starts. What factors lead to counterfeit development in a country?
@tech4people – yes but there is still transparency within a global organization, paper trail and internal communication – even though there is regions within one organization
@Tech4People, that's a critical piece of hte puzzle…and as you know, we talk a lot about that at EBN.
@Hailey-Can you imagine what can happen if these companies give us such highly modular products which they can then take back(and strip for all the valuable Heavy metals in them) and re-use again and again?
It would just be super-awesome for the Environment!!!
Problem is getting this reverse Supply-Chain working effectively to prevent all that stuff entering a Landfull today.
@Hailey – counterfeit is a biproduct of the gray market which is where many counterfeit parts creep into the supply chain
“Next both the USA and Europe need to handle their own waste properly instead of sending it to China, India, Nigeria etc”
Not always a bad business for the receiving countries
@Steve, and what keeps the gray market alive? Is it mainly people looking for the cheapest solution?
simple economics also contributes to counterfeit products – no supply with high demand
@Hailey – I agree. Recycling is where the whole thing began. Different cultures have very different views on counterfeit. I have spoken with some distributors that think there is nothing wrong with re-marked product as long as it works, Crazy, I know!
What happens when a Franchise Distributor issues an RMA to a large OEM/CM who has purchased parts from a Independent Distributor who has sourced from the open market. Now in fact the Franchise Distributor may have parts in their stock that could be “Suspect Counterfeit”. The way I see it,..no one in the supply chain is safe. Your comments ?
Still here?
@ComponentSense…and that makes it even more complicated. You are getting into huge cultural differences.
@Component Sense-Not really surprising.In fact its good behavior in a way.
@Steve: Is counterfeiting the solution to “no supply with high demand”?
Definitely, Susan, and going strong! Good to have you with us.
@odyseey, even though distribution works on the fifo system, there are checks and balances in place to ensure that they are issuing an RMA for their product
Dear Steve,
What is your answer about expected SIA Standard?
Lev Shapiro
@Hospice – its not a solution, it is a result
Thanks, Hailey.
@Steve: I see!
Hello all, Ryan from Accu-sembly, a contract manufacturing company, here. Having just caught up on what's going on, I'd be interested in regulatory solutions for the gray market problem. Obviously if a part is obsolete and franchised channels no longer have it, and manufacturers no longer make it, but it's a legacy item for gov/military/aerospace etc. you have to source it from somewhere.
@Steve, if you could wave a magic wand and make three changes and have everyone fall into line in order to end counterfeiting, what would be on your list? (And anyone else? What would you do if you ruled the world?)
@Steve – I find it irritating that Franchise in general wants to blame the problem on the “gray market”. There are many levels of Non franchised Distributors that get lumped in together many of which are highly reputable and are working harder than anyone to beat the counterfeit problem. We will always be a necessity as franchise cannot support all parts all of the time. Many brokers these days predominantly buy from franchise because they can get stock in the most stable market we have seen in decades. That will not always be the case. Be prepared, work together and we can make our world a safer place whatever the supply and demand situation.
Hi Ryan, glad to have you with us.
@Lev, SIA are forming an anti-counterfeit commitee with the aim to educate and provide guidance to MFG on brand theft
Thanks Hailey. Good to be here.
@ComponentSense I work with a number of brokers and non-franchised distributers who have (to my knowledge) never supplied an counterfeit part. However with more oversight, is that history reliable moving forward? I'm not sure one way or the other.
@RyanL, there are multiple continuing semiconductor manufacturers who can emulate or replicate EOL and obsolete devices to avoid catastrophies in the field caused by sub-standard parts. Gray market doesn't have to be a source for this type of solution.
@ compsense… There was a survey by the OCM's stating that 57 % of counterfeits came from brokers and 21% from Authorized distributors, so authorized does not always mean secure.
@Hailey – very open ended question! But my magic wand would hope to curtail and have stingent regulations for all regions, have transparency across the supply chain for both mfg and buyers
@ Steve Im curious what is going to be the acceptable cost to make sure the parts are non-counterfeit. For us in the aerospace and military contracts the government is demanding 100% check on deliverables. But being a part of the G-19 if all the tests are run to assure 100% that the parts are not counterfeit your looking at hundreds of dollars maybe thousands in screening cost. How far is the industry willing to support the expense of screening?
@George Sometimes those manufactuerers price us out of being competitive though.
@Ryan-Problem with Bringing in Regulators is this-Too much paper-work is not good for the Growth of any industry-Just look at the mess that Obamacare has caused in Healthcare today.
when we say gray market we are talking about broker channels with no proper warehousing, iso certs etc
@Hailey – it has to be handled at source as my earlier point. All the quality brokers have very strict processes and procedures these days and it is working. Buyers don't penny pinch and use your head. If the price seems to good to be true it probably is, walk away. Also if something cannot be found by your trusted broker accept it and find another solution.
@ryanL, I think this whole issue has just been brought to the top. It's all about $$ in the end.However, we all seem to understand the severity of the problem when counterfeit and sub-standard devices enter products in the field. We as an industry, must all agree that this is not a way we will make money.
@StevenNason That is one of our problems as well. When we are asked about testing we can certainly offer it, however when customers see the cost they (in my experience so far) always decide to take the risk.
@Steve-Do u feel just having ISO certification is enough to say something is genuine or not?
@RyanL, is that because they don't understand how big the risk is? Or they figure it will cost less in teh long run? It would seem to me that there a lot of cost to reputation and customer relationships that would be hard to measure.
@Steve – In most articles “Gray Market” usually refers to anyone that is not franchised. The true definition of the counterfeiters should be Black Market as their work is illegal and fraudulant.
@tech4people – no, absolutely not – u need to make sure ur warehousing is fully up to speed with continuous improvement. Authorized distributors will also have internal quality by the manufacturer
@George I agree completely. Our current policy is to use only Authorized Franchised Distribution. If a part is not available we will give the customer the option of a secondary manufacturer of the EOL part or the gray market, then we further break it down by offering testing. The dollar seems to rule the day, and usually customers choose gray market solutions without testing.
@componentsense – agree with your point that when it comes to counterfeiting the terminology should be changed
@RyanL, what sort of premium would that usuallly be to add teh testing and do it the “right” way?
@RyanL – as regulations become more stringent with more onerous repercusions do u not think that people will be less willing to take the risk?
@Hailey-Great question! I was wondering this very same issue just now! How much will customers readily pay for Testing?
@ryanL – I was chatting one of the biggest European Military manufacturers, Procurement Director a few weeks ago and he told me the pressure to cut costs on components of all sorts is greater than ever. In my own life I have found cutting cost often leaves you with egg on your face. Why risk lives in this way. Perhaps Governments need to do their bit too and accept the price of admission.
with cost pressures people are usually unwilling to pay any additional fees
@Hailey I think it has a lot to do with not understanding the risks, and that when you're already competing with cheaper overseas options they just want to keep things as cheap as possible.
As for the premiums they can double or triple the cost of a component depending on the level of testing.
@Steve That is one of the questions I ask all the time. At what point will regulation necessitate even a complete redesign just so that newer active parts can be used.
@ComponentSense Most definitely. You can't always have your cake and eat it too.
@RyanL, that's a big nut… i guess it's not suprising that they resist.
@Hailey Unfortunately, and the worst part is that as counterfeiters become better at their “jobs” it becomes harder and requires more testing to be sure.
@component-Its so much easier to cut the salaries of Overpaid Govt Employees today.Unfortunately no Government will win elections this way.Can they?
@RyanL, what level of premium do you think they could readily swallow?
@Ryan-couldnt agree more.I have seen this very same issue in Software as well today.
@RyanL, that seems to be true in every “dark” area, from IT security to component fraud. These guys adopt the emerging technology adn get better at what they do faster than most organizations can keep up.
@Steve, we are getting close to an hour, but lcan you give us some real world examples that should be followed? Name some innovative methods companies are using as they institute anti-counterfeit policies.
it used to be blacktopping, empty shells, pulls, reverse engineering but now it is much more sophisticated
@Hailey I can't see a problem with anything from 10%-30% of the part cost, for the peace of mind that it provides. Though I do have customers who pinch every penny and may not go for even that. Generally though, I think it would be a greater pro than con.
It is unfortunate these brilliant minds don't use their powers for good instead of evil.
@Steve, what would that look like? the more sophisticated methods?
@Hailey – companies are adopting more stringent regulations , building awareness through customer education, recogizing the importance of industray standard organizations like ECIA,
@Steve Indeed, much more sophisticated.
We rarely see any suspect stock these days. We handle thousands of lines of stock each week with no issues because we know where it has come from. in rare instances we come across something suspicious and usually know very quickly and relatively cheaply that parts are suspect. There after it can cost up to $2000 to be sure that the parts are dodgy. If they fail the IDEA standard practices there is no point in taking it further, reject the parts and save the cost of the higher level testing.
I know, if we could get the bad guys working for us we could go far! guess it's not lucrative enough. I keep thinking though that there's some fiscal m odel that could work. I mean, if we weren't spending so much ttrying to stop teh bad guys, maybe we could pay people more. (Fair warning: i tend toward idealism)
@Hailey, it used to be just doing simple acitone tests
@Hailey As a hopeful realist we could definitely do better!
One more question, we've been talking about the SIA, and various regulations and laws in this area. Let's cover one more: How does the National Defense Authorization Act (NDAA) require the industry, and specifically contractors, to address the counterfeit problem?
@RyanL, i'm with you!
it is getting rolled out right now – but essentially the government has passed legislation that sanctions suppliers and contractors to allow counterfeits to enter the military supply chain
Just a final thought. I ordered Xilinx Spartan FPGAs from a non-franchised distributor. The parts cost about $55.00/ each. The anti-counterfeiting verification for 10 parts was $1200.00. I went elsewhere. I payed $89.00 for the parts.
@Hailey Right now from what I've read and am hearing from my friends and collegues across the industry it is still too vague to really say for sure. However, as the language become more clear we'll all have to adjust, hopefully with as little cost impact as possible.
some argue that the regulation has gone too far and that a more balanced approach is needed – but contractors cannot pass the costs for this increased enforcement to the DoD
@Doug Thanks for that one! I didn't have a good example off the top of my head with numbers to back it up!
ultimately liability for counterfeit components is more spread throughout the supply chain
Hi Douglas. So glad you could stop by!
@Steve That is one of the biggest problems with it. If we are required to test, we have to be able to charge for it. Otherwise we simply can't do the DoD contracts.
and that's a huge difference…
@Douglas – it all depends on who you ultimately bought from. If $89 was from a good reliable source you did good. We don't charge for testing. It is my responsibility to make sure our parts are good.
We are hitting the top of the hour…so I have to (reluctantly) start drawing us to a close. Any final thoughts or hopes for the future?
We should do this again.
hopefully we all work together to remedy this situation or curb it so its on the decrease instead of the increase
Indeed, it's been an informative and fun discussion.
@ComponentSense – we look forward to it!!
@Ryan. It was a no-brainer as the FPGA's are usually at the heart of a very expensive design. When I asked how much it would cost for a hundred part screen, the numbers did not scale down anywhere close to proportional. I checked out White Horse and he does anexcellent job, but the parts come from Asia only.
@component Sense..definitely. Steve, maybe you'd like to come again? We didn't even get into reproting coutnerfit parts or very deeply inot obsolete or EOL as prime targets. we have plenty of ground left I think!
@Steve I hope so! I know the numbers industry wide are against us at the moment, but if each of us individually takes responsibility to do our best we can and will turn the tide. Like CompomentSense said, reponsibility is key.
OK everyone… Thank you so much for coming! and a special thank you to Steve for sitting in the hot seat. Stay tuned and we'll be chatting again soon!
@Hailey – it would be my pleasure! We think this topic is highly important and look forward to discussing more
Thank you everyone.
Thanks everyone
And, it's a bit early, but have a great weekend!
Have a great day all, thanks for the discussion.
Bye all!
@Douglas-Not at all surprising.Too much costs tacked on in the name of regulations today.
@_hm: Yes working according to a plan for anything is very vital. It minimizes the mistakes since you know what you are doing.
What is driving this trend? Are execs working harder and are on the road all the time or are they taking more time off and doing their core work on their cell phones?
This is driven by a few factors: the popularity of smartphones/tablets, the need to constantly use mobile phones while in meetings, or even out of office in social gatherings, for example 🙂
What ever is the driving factor, the exexutives will definitely appreciate the simplicity and to be able to access the application from mobie with ease of use and at any time. But this is defijitely going to take a lot of time to get things moving faster towards mobility.
_HM, it may be important not to ruch, but there's so much pressure to go mobile. It's everywhere. I think that making mobile part of teh supply chain should be done strategically–and if you don't do it strategically it's going to go on anyway. Pandoras box is open.
Good question, @flyingscot, i'm willing to bet it's a combination of both those things, but i can't wait to hear what others have to say.
@Hailey: Yes indeed it's a combination of both. I can join you in confirming that.
Smartphones are becoming more sophisticated, employees are working harder during regular work hours and off hours, and many prefer not to lug around laptops. They would rather make changes to their projects from small devices they carry in their purse or pocket. I do. The best thing about not having to take along a lptop when traveling by plane: TSA doesn't require you to take your smartphone from your purse and put it in a basket on the conveyer belt to x-ray.
As along as the processes are kept the same whether you are operating from your desktop/laptop/tablet or a smart phone , there should not be any harm using mobile phones for the supply chain related activities.
Using mobile has a distinct advantage of feeling at home while working , and feeling at work even while at home, in a restaurant or on a beach.
Mixing leisure with work is the best advantage that mobile technology offers .
Laurie, now it's the time for apps. Now most of the vendors are developing their own apps for Apple and Android platforms, so that customer can order and track the items from mobile. I personally feels that it's more convenient than placing an order through web. The only issue is with high speed mobile connectivity.
“Mixing leisure with work is the best advantage that mobile technology offers .”
@prabhakar: Yes, mobile technology has ended all physical limitations to an office and you can virtually make any place your office. Employees have the perks of working from places they're most comfortable at. However, whether this really enhances the productivity of an employee is something that's yet to be proven.
@Laurie: I think the trend of companies supporting apps available on multiple platforms is in sync with the BYOD culture that many companies are embracing. When they want you to bring a device of your choice to work, they also have to give you the flexibility of working with apps over the cloud that can be run on multiple platforms such as iOS and Android.