Why is there an opportunity in the market for counterfeiters? Let’s focus on industrial electronics.

The issue of counterfeit components originated with concerns coming from the military and aviation industries, and it has been discussed and addressed for a number of years. However, the situation does not show any signs of diminishing. On the contrary, the issue is getting bigger and bigger. Current estimates state that the value of counterfeit components entering the electronics supply chain is in the billions of Euros annually.All links in the electronics supply chain are affected, and the fight against counterfeiting is a common cause for all of us involved in electronics. According to statistics, the number of recorded cases has increased at least tenfold in the past ten years. In addition, many cases go unreported or even unnoticed.

Counterfeit components can be manufactured in many ways. The original way was simply to refurbish recycled components and sell them as new, a method called blacktopping. Then came remarking the components as something different than what they were, based on customer demand. Use of manufacturer rejects or selling empty shells without die are common practises as well. We are now talking about manufacturing and counterfeiting new components from the die onwards and marking them as components from well-known manufacturers. Differentiating counterfeits from good components is an enormously difficult process that requires a number of verification steps and sophisticated equipment to separate the good from the bad. And while the companies are getting better at recognising the bad parts, the counterfeiters are getting better in their work as well, making it harder for us to recognise the faulty parts.

The open market, in this context meaning independent distributors, is the main source for counterfeits, but counterfeit parts are also seeping into authorised channels. There have already been cases where counterfeit components have been reported from these channels.

While many of the independent distributors are engaging in this illegal activity, there are a large number of them who are responsible and who are as worried about this problem as we, the manufacturers, are. One of the Enics Approved Independent Distributors recently told us that they have 4000 independent distributors on their black list.

Why is there this opportunity in the market for counterfeiters? One reason is because the counterfeit parts are often sold at lower prices, creating an opportunity for extra profit for different links in the supply chain and providing an incentive for counterfeits to seep into the market. Another reason is because of material shortages. The open market plays a large role in this area and it’s an issue that needs to be solved. Obsolete components, which are a major problem in industrial electronics due to long product life cycles, need to be procured to assure delivery of products. Once again, the open market is needed to address this issue. According to ERAI Inc., who among other things collects statistics on counterfeits, 72% of counterfeit components are obsolete components. This makes industrial electronics companies a prime target for pirates and gives us lot to think about.

Even though ICs still top the list of most counterfeited components, we see more and more passive components worked on today. Recently, there was a case were faulty electrolytes were stolen from manufacturer and used to manufacture capacitors that were labelled with the name of a reputable manufacturer, causing serious harm for some PC manufacturers who purchased them. And just a few weeks back, a known automotive manufacturer issued a recall as their supplier had reportedly used pirated plastic raw material in mechanical components.

So the threat is out there, and it is up to all of us to combat it. To eradicate it will take years, but due to the risks involved for everybody, this is a fight worth fighting, and requires all the links of supply chain to be aware and actively work against counterfeiters.
Are you interested?

Would you like to hear about our counterfeit process? Contact our Supply Chain (For Industrial OEMs only):

Check also what ERAI Inc. and IDEA (Independent Distributors of Electronics Association) know: