Counterfeit Parts Are on the Rise

By Paul Romano, Fusion Trade

The proliferation of counterfeit parts in the supply chain has reached endemic heights. According to the National Electronics Distributors Association, it’s become a $100- billion problem. In a January report on a four-year study conducted between 2005 and 2008, the U.S. Department of Commerce revealed that 39% of 387 companies encountered counterfeit electronic components, microcircuits, or circuit boards. Some industry statistics even suggest that counterfeit parts account for 10% of all electronic equipment sold. Regrettably, this predicament isn’t likely to be remedied in the near future.

In fact, counterfeiters are becoming far more adept at passing off bogus parts by leveraging the same sophisticated technologies that chip manufacturers use to produce authentic ones. Included in the counterfeiter’s toolkit are ovens to bake recoated parts that use material made from the shavings of the counterfeit part (see Figures 1 & 2). In addition, laser equipment re-marks parts to appear as if they’re coming from a specific manufacturer—and with a later date code.

Figure 1: A counterfeit device that has been coated with a compound that will not be detected by normal permanency testing, but can be chipped off to reveal the remarked device.

While the counterfeit problem is harmful to the high-tech industry as a whole, such fraudulent behavior also reaches consumers on the receiving end. Corporations chance losing time and money. Yet the customers’ well-being may be at stake, as those faulty chips are placed into medical examination equipment, air-bag deployment systems, home heating technologies, etc. While counterfeit parts may work, they don’t work well. In the examples listed previously, sub-par performance is more than unacceptable.

Figure 2: A counterfeit device that has been blacktopped. This topping can be removed using standard chemicals to reveal the actual device below.

China continues to be the hotbed of counterfeit activity— particularly as e-waste recycling initiatives drive more and more corruptible products to Asian shores. There, all likes of product are being passed off as original. While semiconductors still represent the greatest piece of the puzzle, connectors and resistors—really any type of component that will bring in cash—are being counterfeited as well.

As OEMs and EMS providers are being compelled to ensure that junk parts don’t enter their stock, additional pressure is placed on the distributors that source components. Independent distributors that play in the open market are perhaps scrutinized more closely. That’s because they haven’t always been in the OEMs’ favor, largely due to counterfeit concerns. As economic, staffing, and availability issues continue to impact inventories and the supply chain, however, OEMs have no choice but to conduct business with open market independents. They’re the ones that can get parts quickly and often at a more competitive price.

For independent distributors, the task of ensuring authenticity is becoming increasingly tricky as counterfeiters become more and more savvy. No longer will a visual inspection cut it. Even chemicals such as acetone are falling short of indisputable counterfeit identification. For the distributor that wants to remain the vendor of choice for an OEM, making sure that the parts are true to life has become the central focus of their business.

To combat counterfeit efforts, distributors are relying on laboratory-quality equipment to test component samples. High-Power X-ray Technology, as shown in Figure 3, is used to analyze and photograph die and lead frames to compare confirmed good samples to other parts from the same batch. Such powerful technology allows inspectors to check wire bonds, look for void defects, and detect moisture penetration. Decapsulation technology has become a favorite in figuring out fakes. With decaping, acid is used to burn through the plastic casing, leaving only the silicon inside. Once the plastic has been removed, the use of a 600X microscope (Figure 4) can show the die of a part, which can offer clues as to whether a product is indeed the real deal. Other technologies being employed include XRF photo-florescence, which analyzes the material make-up of a part by considering such things as the presence of lead. Radio-frequency-identification (RFID) applications still loom as well. Until manufacturers take the costly step of incorporating such identification into their manufacturing process, however, distributors won’t be able to follow suit.

Figure 3: Real time X-ray imaging allows the die and lead frame to be photographed and compared to either a known good sample or parts from the same batch.

Independent distributors also have assembled as a “band of brothers” to collectively thwart counterfeit efforts. One organization dedicated to a collaborative approach to ridding the industry of shams is the Independent Distributors of Electronics Association (IDEA). IDEA is a nonprofit trade association. Its mission is to advance industry ethics, ensure customer satisfaction, establish standards, and promote education. IDEA membership is not subscription based; it’s earned. Companies are accepted only after meeting all requirements and receiving a unanimous confirmation by IDEA’s board of directors. As such, IDEA’s rigorous standards set the bar for the industry as a whole.

Another industry organization that wields influence is the Electrostatics Discharge Association (ESD) with its ANSI ESD 20.20 certification. The sheer sensitivity of electronic parts to static electricity warrants such an association, as product deterioration can be at times unnoticeable with testing and even performance. Even minimal damage can impede product functionality, however. Many companies want to achieve ANSI certification to ensure the highest-quality footing. Yet even those that aren’t looking to attain such status should at least be in compliance with its standards.

Figure 4: A Fusion Quality Technician uses a high-power 1000x microscope to observe parts for any type of counterfeit handling or rework.

ISO certification is yet another quality standard. ISO certification addresses business processes to help maintain product quality. Under ISO guidelines, companies are required to adhere to certain business practices that, when applied industry wide, afford customers greater protection. By agreeing to play the game by the same rules, ISO-certified companies offer customers a transparency that makes them worthy business partners.

As with any collaborative effort, the sum is only as great as its parts. It remains the onus of each individual organization to disseminate warnings of counterfeit parts to the entire industry as well as its customer base. Beyond the reporting of fake components, companies have a responsibility to detail other business faux pas, such as delinquent payments or unfilled order requests. Working collectively—and with the support of industry associations and certifications—independent distributors are granted greater ground cover. This measure, in turn, delivers better protection for OEMs against receiving fake and faulty products. Consumers win too, as they are ultimately saved from headache and harm.

While industry affiliations certainly add value and credibility, customers should rely on distributors that intimately know the manufacturer and its products and processes. To that end, stringent vendor verification procedures are essential. Included in such procedures should be the validation of manufacturer specifications to guarantee traceability. Trustworthy distributors that procure and sell passive components will offer full traceability back to the manufacturer that is both guaranteed and documented. They also will strive to achieve 100% traceability on all of the parts they sell.

The sourcing of new vendors should lead manufacturers to work only with distributors that have strong quality systems and processes. Readiness to host a site visit can’t be underestimated. Distributors that invite customers in for a “look under the hood” are clearly comfortable with that level of transparency and likely have nothing to hide. Furthermore, sophisticated distributors will leverage a vendor-rating system to rank previous experiences.

Historical data paints a picture that showcases the reliability of a source. For each sourcing engagement, the distributor will rate the event and catalog it along with the part. By scoring batches of products, patterns emerge that tell a source’s story. In other words, whether the source is a solid supplier or a risk can more easily be exposed. A directory of parts provides a means of comparison that can be made against internal and industry databases. And the distributors willing to back their quality claims with financial insurance are the optimal partners. Some offer errors and omissions policies of up to $10 million.

The fact that the world has become increasingly flat makes the sourcing of authentic components and parts a global dilemma. But with industry guidance, distributor dedication, and the commitment of the government’s anti-fraud agencies, counterfeiters may soon need to forge themselves into another profession.

Paul Romano has been the Chief Operating Officer for Fusion since 2001. Responsible for overall supply chain management, one of his principle functions is the design, development, and management of quality systems and processes for the detection and prevention of counterfeit components. Prior to Fusion, Paul held senior management positions with Converge and Real World. Paul holds an MBA from the Booth School at the University of Chicago and a BA from Bucknell University.