Is the authorised electronics supply chain doing all it can to fight counterfeits?

There’s no doubt that the potential presence of counterfeit components is an occupational hazard in the grey market and, although many reputable grey market suppliers are doing an excellent job in ensuring their customers receive only genuine components, the incidence of report cases is significantly greater in the grey market. Does that mean, though, that the threat of counterfeits is something that authorised supply chain suppliers don’t need to be concerned about? Is it as simple as assuming that, by using only the authorised supply chain, the risk is eliminated? Probably not.

First, a common practice in the authorised supply chain that causes false alarms.

Anyone familiar with the issue of counterfeit semiconductors and the methods commonly used to test for them will know that, other visual inspection, the next line of defence is to test for so-called black topping using acetone to dissolve the painted surface, if there is one. This is because counterfeiters often disguise the true identity of components by sanding the top surface to remove the original markings before applying a layer of black paint prior to adding the bogus part number, date code and logo.

Unfortunately, OCMs sometimes re-mark their own semiconductors for legitimate reasons, for example where parts have already been marked and subsequent testing identified them as conforming to a higher or lower specification to the one already marked on the part. Goods inwards inspection using acetone on parts re-marked in this way not unreasonably leads to the initial conclusion that these parts must be counterfeit especially when the accompanying documentation contains no notification that the parts have been re-marked. Very often, OCMs will not even issue a product change notification (PCN) to advise that parts are subject to re-marking.

There is a view that OCMs don’t need to notify their customers where they re-mark parts because, as they are being supplied through the authorised supply chain, by definition, the parts cannot be counterfeit. Apart from the fact that re-marking represents a material change, which should warrant a PCN, the view that counterfeits cannot infiltrate the authorised supply chain is naive to say the least. The risk of counterfeits is significantly reduced when sourcing through the authorised supply chain but it doesn’t eliminate it by any means. Counterfeit parts can infiltrate the authorised supply chain in one of two ways.

First, in times of product shortage, like the one the supply chain is experiencing now, authorised distributors have been known to source components from the grey market to fulfil overdue orders if the customer is important enough and applies enough pressure. Unless those parts are tested in accordance with recognised international standards, there is no guarantee they are not counterfeit.

Secondly, if an OEM returns product to their supplier, whether an authorised distributor or an OCM, there is no guarantee that the batch they return is the one they received from that supplier in the first place. Very often, the distributor will only check the part number, quantity and condition of the parts and their packaging and not that the batch or date code matches the one that they originally supplied. The returns could have been supplied by another supplier, a grey market supplier, and they could be counterfeit.

There are number of ways, therefore, that authorised supply chain suppliers could better help their customers and help themselves starting with OCMs notifying their customers, their distribution networks and their OEM customers, when the semiconductors they are supplying have been re-marked. If authorised distributors source components from the grey market, they should undertake test and inspection procedures compliant with the appropriate international standards and, when OCMs and authorised distributors agree to a product return from their customer, they should ensure that the batch or date code of the return matches the one on the components originally supplied.

With product shortages showing no sign of abating any time soon, the threat of counterfeits infiltrating the supply chain to fill the current gap between supply and demand is probably greater than ever and OCMs and authorised distributors need to be as vigilant as their customers to avoid being caught out.

Roger Rogowski is a freelance management consultant and business partner at the UK's Anti-Counterfeiting Forum.