© 2011 Rochester Electronics, LLC

Page 6

September 2011

All Rights Reserved

 

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High-value products: Counterfeiters sell devices that cost them little to source but can be sold at the

high market price of the genuine devices.

Here are factors and conditions that make counterfeiting tempting and profitable:

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Incorrect and inexpensive “reverse engineering” can lead to the production of components that do not

operate as the originals.

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Phony labels, certificates of compliance, and traceability documentation can be made relatively easily

through the use of digital photography, digital printing, and widely available, easy-to-use computer

software. The cost for a complete setup is low, the equipment takes up little space and is portable, and

the quality of the output is adequate.

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Computer hacking can lead to the illegal acquisition of confidential information as well as the alteration of

company information.

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The Internet provides a perfect marketplace for counterfeit and gray market products. It’s easy to set up a

reliable-looking site. The entire sale can be handled online. And it’s easy for the counterfeiter to “escape”

when complaints start coming in. He just shuts down the site and opens up another one in another name.

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The improper disposal of electronic “scrap” provides free inventory for counterfeiters. Many companies

ship their scrap overseas for disposal not realizing that disposal verification will be falsified, and the

“scrap” will be scavenged, cleaned up a bit, relabeled, and sold as new on the gray market.

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Most manufacturers subcontract the production of semiconductor parts. It’s quick money for an

unscrupulous subcontractor to produce an unreported overrun and offload it onto the gray market.

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Requirements of legislation such as the European Union’s Waste Electrical and Electronic Equipment

Directive (WEEE) and Restriction of Hazardous Substances (RoHS) Directive encourage counterfeiters to

provide falsified paperwork stating that devices are compliant. Counterfeiters sell older leaded

components as lead-free, or offer the lead-free parts to exempted industries that need components with

SnPb (tin-lead) plating for their high-reliability products. The European legislation has also forced

equipment manufacturers to ship electronic waste “offshore” for recycling leading to “salvaged”

components being reintroduced to the market as counterfeits.”

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Many countries do not have strong legislation that regulates counterfeiting, theft of intellectual property, or

exports. Often, the legal system cannot keep up with the development – and movement – of the

semiconductor “manufacturing” industry. Even if there are laws in place, there is little chance for

enforcement. This combination of circumstances creates fertile environments for counterfeiters.

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Global outsourcing has produced a complex supply chain in which intellectual property (IP) is widely

exposed. In countries where there is little concern for the protection of IP, its availability simply becomes

a business opportunity.

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Global outsourcing also sends components through multiple hands before they reach their final

destination. Along the way, there is no guarantee of proper handling and storage, adequate inspection, or

requisite testing.

Procurement personnel are increasingly tempted (or forced) to turn to the

gray market where they risk aquiring counterfeit and substandard parts.

Production comes to a grinding halt when the right parts are not on the shelf. When parts are not readily available

from the original manufacturer, buyers often have to be inventive in their search for inventory, but their efforts can

be hampered by purchasing protocols and policies. Often, ambitious production schedules can’t wait for long lead