Update on Counterfeit Components, from EE Times

[saturation]

Counterfeit even gets into authorized distribution channels:



http://www.eetimes.com/electronics-news/4218759/Ferreting-out-the-fakes-in-the-chip-supply-chain?pageNumber=0

Focus on China

While Operation Chain Reaction has its sights trained on the nation’s borders to catch counterfeits as they enter the supply chain, the Senate Armed Services Committee is looking farther afield in a bid to stop counterfeiting at the source.

A group of investigators representing the committee had planned a March trip to Shenzhen, China, a short hop by train from Hong Kong, to investigate operations that have allegedly been supplying counterfeit components for U.S. weapons systems. According to sources, counterfeit parts that ultimately ended up in F-15 fighter jets and U.S. Missile Defense Agency systems had come from Shenzhen. But the Chinese government denied the investigators’ visa applications, asking that the team postpone its trip.

Senate Armed Services Committee chairman Carl Levin (D-Mich.) responded to the request by saying Chinese government officials could “not help themselves by denying access to their country for people on an official Senate mission.” Rather, Levin said, the action would “hurt them.”

Why the focus on China? And why Shenzhen? “Because between 75 and 80 percent of all counterfeit components come from China,” said ECIA president Robin Gray, “and most of those come from Shenzhen.”

Component makers agree, judging by the findings of the Commerce Department study. By a wide margin, China led the list of the top five sources of suspected or confirmed counterfeit parts as identified by respondents.

[alm]

How does this relate to total volume sold? China, and especially Shenzhen may sell the most counterfeit components, but they're probably also near the top for genuine components, if not at the top.

[Uncle Vernon]

Too true Alm. Even as a proportion it does tell the whole story. It would be much more use to identify actual offenders rather than to create sweeping generalisations.

[saturation]

It should be, but since China does little to enforce IP, counterfeit is one variant of this issue.

On the issue of counterfeit components alone, if we look at IC production as an index of all components, its not China who leads, but Taiwan, Japan, and Korea, and what proportion of counterfeit is accounted for by those countries?



http://www.icinsights.com/news/bulletins/Taiwan-To-Pass-Japan-As-Largest-Source-Of-IC-Wafer-Fab-Capacity/

By total revenue looking only at IC production, the top 2 fab houses in the world are in Taiwan, and #1 alone generates total revenue that is greater than the combined output of the bottom 9 in the top 10 list [ my own eyeballing the totals and %].

http://en.wikipedia.org/wiki/Semiconductor_foundry_sales_leaders_by_year



If revenues are proportionate to the total output, Taiwan fab houses in this list represents over 70% of the total IC production, and China  less than 10%.

Counterfeit hasn't just been components, but in complete products, including drugs, and entire stores.  If the government doesn't suppress counterfeit with the same vigor it suppresses freedom of speech, then it tacitly supports it, and if the government is China, then its not the individual offenders that are at fault, but China itself.

http://www.businessinsider.com/china-fake-stores-2011-8

[PetrosA]

I don't know how much it costs governments or manufacturers, but I know that when products with "problematic" components reach the field and get installed, it can cost thousands of dollars to resolve the issues for customers and contractors. What's worse, it's nearly impossible to prove that a repeating component failure is due to counterfeit parts and customers expect repairs done for free (which I can understand...). One recent example that I suspect may be connected with counterfeit parts happened to a contractor I know who purchased about $10,000 worth of outdoor lighting with built in dusk to dawn sensors for his customer. Every fixture has failed at least once, and at this point the repairs have cost the contractor over $1000 and he's still dealing with repeat failures. The manufacturer claims it's not their fault and won't send any more replacements. This could end in a lawsuit that could cost 10s of thousands of dollars because one component was failing.

[alm]

Are the numbers EEtimes quotes about the country that produces them or the country that exports them to the US? If it's the latter, the production numbers can't be directly compared with the counterfeit numbers. I'm also not sure if it's just about IC's. I know about counterfeit resistors, capacitors, LED's and transistors.

I don't have trouble believing that China may be the biggest source of counterfeit components, but I am wondering whether there is some creative use of statistics going one to make China seem worse than it really is.

[saturation]

Yes, the situation you mention is a good example of how problems, and financial losses, domino effect into so many areas. 

I wouldn't be surprised if many products we buy direct from China have counterfeit parts.  But, if they work like the real thing, or if a designer designs around the counterfeit limitations, it could work out and not matter, so long as the finished product works; as far as its longevity that's another issue.

How items are counterfeited is so varied,  a resistor that is just 1/8th watt could be sold as 1/2 watt, just covered with more epoxy to look bigger; a Li ion battery can have only 1/10 the amount of electroylte, so while it works, it has very little mAH.   The general concept in counterfeit is Y posing as X, because X is worth more.  Y could be a legitimate product re-badged to look like X.

Those failures could also be just poor manufacturing.

One problem with counterfeit is no one is being held accountable and punished for counterfeit electronic parts in at least, USA law; in money,  distributing counterfeit currency holds the distributor liable, or at least subject to close investigation to track down the inevitable source of who provided the counterfeit.  In drugs, the FDA will do the same.  But, what of electronics?  The manufacturer of the finished product is held liable for product defects to the buyer. The manufacturer in turn can seek restitution from its contractors or suppliers, but that depends on what contractual obligations were, not by criminal law.  In the end, most distributors or brokers will simply refund your purchase price if you return the parts, but the consequential damages are done. 

I don't know how much it costs governments or manufacturers, but I know that when products with "problematic" components reach the field and get installed, it can cost thousands of dollars to resolve the issues for customers and contractors. What's worse, it's nearly impossible to prove that a repeating component failure is due to counterfeit parts and customers expect repairs done for free (which I can understand...). One recent example that I suspect may be connected with counterfeit parts happened to a contractor I know who purchased about $10,000 worth of outdoor lighting with built in dusk to dawn sensors for his customer. Every fixture has failed at least once, and at this point the repairs have cost the contractor over $1000 and he's still dealing with repeat failures. The manufacturer claims it's not their fault and won't send any more replacements. This could end in a lawsuit that could cost 10s of thousands of dollars because one component was failing.

[saturation]

References to the articles data are in the last page:

http://www.eetimes.com/electronics-news/4218759/Ferreting-out-the-fakes-in-the-chip-supply-chain?pageNumber=4

The actual detailed study from the US gov't Dept of Commerce on the components themselves and the country of origin:
http://tiny.cc/6vpbj

For more info see these links:

http://www.voanews.com/english/news/usa/US-Senators-China-Blocking-Probe-of-Counterfeit-Electronics-123833744.html

http://www.cbp.gov/xp/cgov/trade/priority_trade/ipr/pubs/seizure/
http://www.stopfakes.gov/

UK based info, specific for electronic parts and counterfeiting:

http://www.anticounterfeitingforum.org.uk/counterfeiting.aspx#where
http://www.beama.org.uk/en/news/index.cfm/counterfeit-electrical-products



The USs coordinated efforts to criminalize counterfeit distribution, holding the seller of the goods liable:

http://www.iprcenter.gov/fact-sheets

Are the numbers EEtimes quotes about the country that produces them or the country that exports them to the US? If it's the latter, the production numbers can't be directly compared with the counterfeit numbers. I'm also not sure if it's just about IC's. I know about counterfeit resistors, capacitors, LED's and transistors.

I don't have trouble believing that China may be the biggest source of counterfeit components, but I am wondering whether there is some creative use of statistics going one to make China seem worse than it really is.