Saturday, April 19, 2008

Fake Chips Are Heating Up

Okay, bad pun. Of course, overheating is only one of the threats from counterfeit semiconductors. Fraud in electronics includes: counterfeiting, re-marking, 'pulled' devices of dubious integrity, warranty fraud, FRU fraud, and diverting/gray parts. Statistics are notoriously hard to come by, and in this blog we've highlighted numerous instances (see our Feb 22 blog, for example). Here's some more anecdotal data:

  • One of every 10 tech products sold is counterfeit, leading to an estimate of a direct loss over $100 billion a year. Direct losses include recalls, increased warranties, rework.
  • High-tech products account for four of the top ten border seizures, according to U.S. Customs.
  • Last year, the U.S. and European customs officers seized more than 360,000 fake computer chips in a joint operation. Under “Operation Infrastructure,” the fake goods seized carried more than 40 different trademarks.
  • A $2 fake part leads to losses of $20 if detected at the manufacturing board level. It costs $200 if detected in the market.
  • KMPG will release a white paper in May that estimates the profits lost due to the gray market. It will be posted here, along with KPMG's previous white paper.
This blog entry on VentureBeat by Dean Takahashi, the former Tech Talk Columnist at the San Jose Mercury News, frames it nicely: "Electronics counterfeiting has hit an epidemic level. Surely, there have to be opportunities for start-ups in fighting this problem."

A recent article in Purchasing magazine found that 42% of procurement professionals felt counterfeiting was now a 'serious problem'.

YottaMark has been working on the SIA and SEMI anticounterfeiting task force to establish an industry standard for detecting fake components. The topic will be covered in a session at this year's Semicon West in San Francisco in July.