IC Trends Blog | Electronic Component Supplier News

6 - 8 Reasons Electronic Component Counterfeiters Love Their Jobs

Tweet

 

How the World has Created an Ideal Climate for Counterfeiting

We know about, we’ve talked about, we’ve blogged on the subject of the massive problem that counterfeiting is to the component industry.  In fact, according to Lev Shapiro in his article “Counterfeit Electronics: Threats, Risks and Prevention Practices”, on March 16, 2010, “Statistics places electronics fourth in terms of total seizures by category, after footwear, clothing and pharmaceuticals.”

Judging by how many fake Gucci purses and Nike shoes that we see being peddled on city streets, it’s shocking to see components counted in the same ballpark.  Also in Shapiro’s article, he unpacks why there is such a favorable climate for counterfeiters at this particular point in history.

He lists these as:

1. Weak legislation and enforcement in the countries of low cost economies, especially in China. Enforcement of anti-counterfeiting legislation in these areas is very lax. China has a conviction rate of approximately 5% (China State Administration of Industry & Commerce Annual Statistics).
   1. Since China is the primary area of concern that IC Trends has targeted for counterfeit components, this is a huge problem 
2. Little cultural concern about protection of Intellectual Property (IP). Regulation of exports in China has been relaxed significantly in recent years, causing a large increase in counterfeiting.
3. Developed technology and the growing sophistication allows counterfeits to be produced at far lower cost.
4. Huge accumulations of electronic scrap has become the source of used components and counterfeits. Verification of scrapping is not simple and many scrapped components without adequate control during disposal may find their way onto the grey market, presenting a real problem for Original Equipment Manufacturers (OEMs) and Contract Equipment Manufacturers (CEMs).
   1. See the blog “Electronic Shortages…Again…” for a more detailed account of the increase in raw materials and its effect on the component market 
5. Global outsourcing and a complex supply chain--in many cases spanning multiple partners spread around the globe.
6. Internet commerce. Internet is a market place allowing buyers and sellers to make fast trades without even meeting "face to face." Under such trading, people don't know who they are doing business with. You can buy from a company, pay for the goods and by the time you find out that those components are faulty, the Web site has closed down and the company disappeared. Broker's Forum, an Internet trading platform, has about 3,500 members. Only a few of them have supplier relationship or product inspection programs, leaving many opportunities for counterfeit product entry. The Internet has become the preferred distribution channel for counterfeit and grey market goods because of the low barrier to entry, ease of use and world wide coverage.
   1. Also for reference, see the blog “Your Electronic Component Supplier – 3 Signs You Can Trust Them.”  Offline and especially online, your supplier has specific criteria they should meet to earn your trust and business.
7. RoHS and WEEE requirements create additional opportunities for counterfeiters. They may provide paperwork stating that devices are compliant with the European legislation for old leaded components or offer the lead-free parts to exempted industries that need components with SnPb plating for their high reliability products.
8. Counterfeit has become an extremely profitable business, generating income that can compete with narcotics and weapons trafficking, but at much lower risk.

The climate is right for counterfeiters and with the ever increasing demand it’s easy to see how buyers can run into obstacles.  At IC Trends we’ve been blogging about counterfeiting with increasing intensity over the last year.  Following the CALCE conference we resolved to put additional measures into place to make sure the components we supply for our customers are untouched by counterfeiters.

Here is an update on what we’ve done and how we’ve done it.

• Protecting our customer's supply chain - Increased our inspection capabilities, including increased investment in equipment and training
• Limiting risk by dealing with quality suppliers - Reduced the number of vendors that we purchase from in mainland China
• Stopping the problem before it becomes a problem - Having all product originating in mainland China inspected and tested prior to the product being shipped to our facility
• Building relationships - Personal visits to Chinese vendors to asses their quality controls and to personalize relationships
• Online search capabilities - Continued investment in our MarketMaker® online search capabilities to indentify quality vendors and product