Electronic Supply Chain industry research from the Z2Data Team

Counterfeit Components: A Threat to Electronics Supply Chains in 2021

With the current component shortage, counterfeits are on the rise. How can electronics supply chains avoid the threat of counterfeits?
Chase Correll
July 23, 2021

Strictly speaking, counterfeit components are illegal imitations of legitimate parts or products, and they pose a threat to electronics supply chains.

According to data from ERAI, the global counterfeit services organization, counterfeit components are becoming more prevalent within the electronics industry.

While attaching a number to the figure is difficult due to how often counterfeit parts can go undetected, industry reports suggest consumer and industrial businesses are losing up to $250 billion per year due to the recent surge in counterfeit components.

The Danger of Counterfeit Components

The majority of counterfeited parts originate in China. The true danger of the counterfeit component is it is not manufactured to the standard of a legitimate component. The faked, sub-standard parts often fail to meet the use demands of businesses and lead to product malfunctions and loss of profit.

Additionally, counterfeit components are not heavily tested and regulated, which leads to further dangers within a company's supply chain. Not only could the fake part lead to product failure, but it could also lead to potential compliance infractions.

Counterfeits: They Come in Many Forms

SMT Corporation, a leader in counterfeit policy, defines counterfeit components in the following ways:

  • Substitutes or unauthorized copies of a product
  • A product as defined by the manufacturer's part number identification, date code, and manufacturers’ identification (logo, trademark) in which the materials used or the performance of the product has changed without notice by someone other than the original manufacturer of the product
  • A substandard component misrepresented by the supplier
  • Products that have been re-topped (black-topped), remarked, or otherwise fraudulently altered and/or misrepresented by a 3rd party

Unauthorized copies and substitutes of components present a potential threat to electronics supply chains because they are often low-spec components made to look like higher-spec components. Counterfeiters do this by altering or replacing part numbers, putting lower-spec items into higher-spec packaging, or by mixing lower-spec parts with higher-spec parts.

Substandard components passed off as qualified parts also represent a sector of the counterfeit market. These parts may be marketed as functioning correctly when, in reality, they are sub-par.

Purchases from illegitimate suppliers often prove difficult to avoid for some companies. These illegitimate suppliers will sell counterfeit parts under the guise of a legitimate business. Yet some companies will knowingly buy counterfeits in order to save money. This is never a good idea, due to the potential health and safety threats posed by counterfeits.

What Are the Most Counterfeited Parts?

The most targeted components in counterfeit schemes are semiconductors, integrated circuits, and programmable logic devices. And with the current semiconductor shortage, there is always the potential for an increase in counterfeited semiconductors to meet market demand.

A concentration of semiconductor suppliers and manufacturers located near Jiangsu, China (Source: Z2Data)
A concentration of semiconductor suppliers and manufacturers located near Jiangsu, China (Source: Z2Data)

The smaller and easier to replicate, the greater the risk a component presents in being counterfeited.

Spotting Counterfeits

Just as there are many ways to counterfeit an electronic part, there are also many ways to spot if a part is counterfeited. The first step is to make sure you have a few items that are critical to the counterfeit spotting process. The first item is a microscope with at least 30x magnification. With the microscope, you and your team can better identify even the smallest, most subtle changes to a component. The next item your team should have on-hand is a high-def camera that is used to take photos sent to outside sources for additional verification of any components that may present a counterfeit risk. A solvent like acetone is also critical to spotting counterfeit parts because its use can assist in identifying incorrect labeling and printing. More on that in a minute.

When conducting a visual examination of a suspected counterfeit component, it's essential to look for the following indicators of a fraudulent part:

  • Misspellings and inaccurate labeling
  • Ensure the part and date codes on the label match the same codes on the part itself
  • Make sure the part codes on the part match the codes provided by the OEM/OCM
  • Look for sloppy or inaccurate logos
  • Ensure no parts have been left out
  • Check that the date codes are not too far in the past or future
  • Verify that the font on the part is the same as another verified part from the same manufacturer

Next, you can begin the examination of the component and its features. As mentioned earlier, a solvent like acetone can be used to determine the legitimacy of a part. A counterfeit component runs a higher risk of having its markings and surface rub off if a solvent is applied. A genuine component's markings and surface are permanent.

Checking the component's pins also helps discover any illegitimacies in a part. The pins should have a silver-pink, dim look to them, and should not have any scratches or scuffs. A component's thickness and edge will also help in discovering a fraudulent part. The edges of a forged part may appear uneven and its surface may appear overly polished. This is often evidence of sanding, which can often be proven with a microscope—where evidence of directional sanding can be spotted. Sanding is a process used by forgers to make a lower-quality part look like a higher quality one.

One final way to discover a counterfeit part is to check the component's indents. Manufacturers often make uniform, even indents on a part during the molding process. These indents are helpful for the part placement process. If the indents are not uniform and of consistent depth, then the part is potentially a counterfeit. An additional clue of a forged part is if there is paint on the inside of the indents. Legitimate manufacturers do not typically use paint on indents.

The First Step

Establishing visibility within the supply chain is the first step toward combating counterfeits. Aggregating data on production, inventory, and purchases can enhance a company's supply chain visibility, helping to curb potential counterfeit threats. Incentivizing high-quality standards for vendors is another step companies can take to increase quality assessment and reduce the probability of counterfeits slipping into main supplies.

Companies with access to advanced technologies use blockchain records and computer vision cameras to inspect component legitimacy and reduce counterfeits. Yet even with advanced technology, a company's ability to combat counterfeit components begins with its level of supply chain visibility.

How Z2Data Helps with Counterfeits

Part Risk Manager ensures your components are sourced from verified suppliers, while Supply Chain Watch offers increased visibility within the supply chain and allows for improved supplier insights to ensure your supply chain is safe from shady suppliers dealing in counterfeits.

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