Counterfeit products have long plagued the electronics industry. Consumer electronics – including microchips, iPhones, other electronic devices and their components – represent 10% of fake products seized. The Semiconductor Industry Association (SIA) found that counterfeiting in the US electronic components market cost the industry $7.5 billion in annual revenue and over 11,000 jobs. The FBI further estimated that distributing counterfeit electronic parts is over nine times more profitable than the illegal drug trade.
In addition, US Department of Homeland Security (DHS) records from 2018 show 12% of their seizures included electronic components for automobiles, batteries, machinery and even for devices used in the aerospace industry, some of which affect national security. A 2018 study by the Bureau of Industry and Security showed how counterfeit semiconductors can weaken national security by allowing malware and viruses to infiltrate governmental computer networks and other systems.
How Counterfeit Products Enter the Electronic Components Market
The hub for this counterfeiting originates in China. Over 80% of counterfeit products seized at US borders arrived from China or Hong Kong, though counterfeit electronics also affect markets across Asia, Africa and the Americas.
The reason for this? According to Recycling E-Waste, 87% of the 2.6 million tons of electronic waste gets shipped to Asia, with 90% of this e-waste going directly to China. This waste is then transformed into counterfeit parts that then re-enter the electronic components market as new parts. Using the Internet and global supply chain, suppliers of these counterfeit parts then spread their wares through the electronic components market.
The most counterfeited electronics are integrated circuits, semiconductors and programmable logic devices, though memory, filters, processors converters, relays, capacitors and other electronic parts are also counterfeited. In many ways, the electronic components market is just like any other parts market. Those who order electronic components need them to restore equipment, systems or machinery to working order.
There are a number of contributing factors to why people use counterfeit electronics:
- Bargain hunting factors into much of the counterfeiting within the electronic components market, as both businesses and individuals tend to seek out the lowest pricing.
- Insufficient accountability in the sourcing process allows suppliers to skirt rules and regulations, potentially allowing fake components into the supply chain.
- Limited or inadequate inspection, testing and record-keeping also allows counterfeit products to slip into the supply chain.
- Multi-tiered supply chains contribute by involving more layers, and thus more people, increasing the ways in which counterfeit products can enter the electronic components market.
- Quality and control by suppliers is often taken for granted, which sometimes results in the ordering of counterfeit electronic components.
- Part scarcity sometimes motivates businesses to source products from places they otherwise wouldn’t, increasing the likelihood of ordering fraudulent parts, particularly for products that are approaching the end of their lifecycle.
Knowing how, why and from where counterfeit parts enter the electronic components market allows legitimate suppliers to help prevent their entry. Using a trusted electronics distributor can help reduce or prevent this from occurring.
How to Identify Counterfeit Electronic Components
According to Don Elario – the vice president of the Electronic Components Industry Association involved in industry practices – retailers should always work through authorized distributors and manufacturers, who are much less likely to deal in counterfeit parts. Meanwhile, retailers and end use customers can help spot counterfeiting in the electronic components market in a variety of ways.
Examining Labeling and Packaging
Counterfeiters tend to find it difficult to exactly replicate the original labeling and packaging, so it’s important to inspect to ensure that:
- All parts are included in the packaging.
- Country code matches country of origin.
- Date codes on labels that match the components, and that date codes aren’t far in the past or future.
- Labels have no misspellings or wrong information.
- Logos and other branding match the original manufacturer, including the fonts used.
- Part codes match the original manufacturer.
Examining & Testing Components
Using an X-ray to view internal parts helps agencies and logistics partners charged with discovering counterfeit electronics to identify anomalies. These include:
- Fake electronic components often have pins that have oxidized, look overly shiny or are inconsistently placed.
- Parts that lack uniformity on indentations, which often indicate counterfeit parts, as original manufacturers leave clear indentations to facilitate easy part replacement.
- Rough-edged or inconsistently thick parts result from counterfeiters sanding parts in order to eliminate original codes on components.
Legitimate manufacturers additionally record component tolerance, so testing electronic components can determine whether you’re working with original parts. When results differ from what the usual specification, it’s probably counterfeit.
Another way in which to identify fake electronic parts involves scanning them with acoustic microscopes. This helps identify laser engraving, showing the original manufacturer’s markings on counterfeiter parts. This method for determining counterfeit electronic components is preferred, as it doesn’t’ damage the product should it pass the test.
Blockchain & IoT
Two technologies – blockchain and the Internet of Things (IoT) – when combined look to play a significant role in effectively identifying and limiting counterfeiting in the electronic components market. When combined, these two technologies help prevent defective or fake parts from entering the production line as well as reverse-engineering electronic goods and components. Companies often worked at a disadvantage against counterfeiters, due to dispersed networks, sourcing and data storage, making counterfeit components difficult to authenticate.
Blockchain with integrated IoT helps make such purchases transparent by providing an unalterable record of products through their lifecycle. This ability to detect counterfeit components at a glance by providing the ability to trace and record data about components from the source to its end user. This allows companies to more easily identify counterfeit parts and communicate with their partners throughout the supply chain in order to ensure product authenticity, satisfy regulatory measures and protect end users.
Here’s how blockchain and IoT work throughout the supply chain:
- Manufacturers often lack the ability to trace whether components are authentic due to the complexity of the global supply chain; blockchain combines with IoT to help them comply with regulations, trace from where parts originate and allow producers to track a variety of data about components’ origins.
- During the sales process, this technology can help identify manipulated labels and reverse-engineered products, which has been made more difficult by the proliferation of third-party vendors, particularly when it comes to online retail.
- Increased calls to customer support can indicate use of counterfeit components within products, leading to rising service requests, replacing or repairing malfunctioning products and skewing customer satisfaction ratings. The combination of blockchain with IoT can help identify these service issues and help reduce harm to a company’s reputation.
In short, the practical applications of blockchain technology within an IoT network helps prevent the initial use of counterfeit products in the manufacturing process, product packaging and even afterwards, when counterfeit parts can affect customer satisfaction.
Using Trusted Suppliers
In order to curtail the proliferation of counterfeit components, retailers and distributors need to play their part. By identifying the provenance of electronic components, screening for authenticity, adopting cutting edge technology to trace authentic parts and working with their partners throughout the supply chain, companies can help curtail counterfeiters. Using trusted suppliers to source parts in the electronic components market will only become more important.
Solid State Inc. supplies a wide range of electronic components from our base in Bloomfield, New Jersey. As a trusted supplier and distributor in the electronic components market, Solid State partners with manufacturers all over the world to distribute original, quality parts from verified providers. To inquire about a specific part, please contact us today. The FBI further estimated that distributing counterfeit electronic parts is over nine times more profitable than the illegal drug trade.
In addition, US Department of Homeland Security (DHS) records from 2018 show 12% of their seizures included electronic components for automobiles, batteries, machinery and even for devices used in the aerospace industry, some of which affect national security. A 2018 study by the Bureau of Industry and Security showed how counterfeit semiconductors can weaken national security by allowing malware and viruses to infiltrate governmental computer networks and other systems.
How Counterfeit Products Enter the Electronic Components Market
The hub for this counterfeiting originates in China. Over 80% of counterfeit products seized at US borders arrived from China or Hong Kong, though counterfeit electronics also affect markets across Asia, Africa and the Americas.
The reason for this? According to Recycling E-Waste, 87% of the 2.6 million tons of electronic waste gets shipped to Asia, with 90% of this e-waste going directly to China. This waste is transformed into counterfeit parts that re-enter the electronic components market as new parts. Using the Internet and global supply chain, suppliers of these counterfeit parts then spread their wares through the electronic components market.
The most counterfeited electronics are integrated circuits, semiconductors and programmable logic devices, though memory, filters, processors converters, relays, capacitors and other electronic parts are also counterfeited. In many ways, the electronic components market is just like any other parts market. Those who order electronic components need them to restore equipment, systems or machinery to working order.
There are several contributing factors to why people use counterfeit electronics:
- Bargain hunting factors into much of the counterfeiting within the electronic components market, as both businesses and individuals tend to seek out the lowest pricing.
- Insufficient accountability in the sourcing process allows suppliers to skirt rules and regulations, potentially allowing fake components into the supply chain.
- Limited or inadequate inspection, testing and record-keeping also allows counterfeit products to slip into the supply chain.
- Multi-tiered supply chains contribute by involving more layers, and thus more people, increasing the ways in which counterfeit products can enter the electronic components market.
- Quality and control by suppliers is often taken for granted, which sometimes results in the ordering of counterfeit electronic components.
- Part scarcity sometimes motivates businesses to source products from places they otherwise wouldn’t, increasing the likelihood of ordering fraudulent parts, particularly for products that are approaching the end of their lifecycle.
Knowing how, why and from where counterfeit parts enter the electronic components market allows legitimate suppliers to help prevent their entry. Using a trusted electronics distributor can help reduce or prevent this from occurring.
How to Identify Counterfeit Electronic Components
According to Don Elario – the vice president of the Electronic Components Industry Association involved in industry practices – retailers should always work through authorized distributors and manufacturers, who are much less likely to deal in counterfeit parts. Meanwhile, retailers and end use customers can help spot counterfeiting in the electronic components market in a variety of ways.
Examining Labeling and Packaging
Counterfeiters tend to find it difficult to replicate the original labeling and packaging exactly, so it’s important to inspect to ensure that:
- All parts are included in the packaging.
- Country code matches country of origin.
- Date codes on labels that match the components, and that date codes aren’t far in the past or future.
- Labels have no misspellings or wrong information.
- Logos and other branding match the original manufacturer, including the fonts used.
- Part codes match the original manufacturer.
Examining & Testing Components
Using an X-ray to view internal parts helps agencies and logistics partners charged with discovering counterfeit electronics to identify anomalies. These include:
- Fake electronic components often have pins that have oxidized, look overly shiny or are inconsistently placed.
- Parts that lack uniformity on indentations often indicate counterfeit parts, as original manufacturers leave clear indentations to facilitate easy part replacement.
- Rough-edged or inconsistently thick parts result from counterfeiters sanding parts in order to eliminate original codes on components.
Legitimate manufacturers additionally record component tolerance, so testing electronic components can determine whether you’re working with original parts. When results differ from what the usual specification, it’s probably counterfeit.
Another way in which to identify fake electronic parts involves scanning them with acoustic microscopes. This helps identify laser engraving, showing the original manufacturer’s markings on counterfeiter parts. This method for determining counterfeit electronic components is preferred, as it doesn’t’ damage the product should it pass the test.
Blockchain & IoT
Two technologies – blockchain and the Internet of Things (IoT) – when combined look to play a significant role in effectively identifying and limiting counterfeiting in the electronic components market. When combined, these two technologies help prevent defective or fake parts from entering the production line as well as reverse-engineering electronic goods and components. Companies often discriminated against counterfeiters due to dispersed networks, sourcing, and data storage, making counterfeit components difficult to authenticate.
Blockchain with integrated IoT helps make such purchases transparent by providing an unalterable record of products through their lifecycle. This ability to detect counterfeit components at a glance by providing the ability to trace and record data about components from the source to its end user. This allows companies to more easily identify counterfeit parts and communicate with their partners throughout the supply chain to ensure product authenticity, satisfy regulatory measures and protect end users.
Here’s how blockchain and IoT work throughout the supply chain:
- Manufacturers cannot often trace whether components are authentic due to the complexity of the global supply chain; blockchain combines with IoT to help them comply with regulations, trace from where parts originate and allow producers to track a variety of data about components’ origins.
- During the sales process, this technology can help identify manipulated labels and reverse-engineered products, which has been made more difficult by the proliferation of third-party vendors, particularly when it comes to online retail.
- Increased calls to customer support can indicate use of counterfeit components within products, leading to rising service requests, replacing or repairing malfunctioning products and skewing customer satisfaction ratings. The combination of blockchain with IoT can help identify these service issues and help reduce harm to a company’s reputation.
In short, the practical applications of blockchain technology within an IoT network helps prevent the initial use of counterfeit products in the manufacturing process, product packaging and even afterwards, when counterfeit parts can affect customer satisfaction.
Using Trusted Suppliers
To curtail the proliferation of counterfeit components, retailers and distributors need to play their part. By identifying the provenance of electronic components, screening for authenticity, adopting cutting-edge technology to trace authentic parts and working with their partners throughout the supply chain, companies can help curtail counterfeiters. Using trusted suppliers to source parts in the electronic components market will only become more important.
Solid State Inc. supplies a wide range of electronic components from our Bloomfield, New Jersey base. Solid State partners with manufacturers worldwide to distribute original, quality parts from verified providers as a trusted supplier and distributor in the electronic components market. To inquire about a specific part, please contact us today.