Blog Post
Electronic Components Market

Beware of Imitation: The Growing Problem of Counterfeit Electronic Components

Monday, February 6, 2023

Counterfeit electronic components are a growing problem in the electronics industry. These imitation products are made to look like legitimate parts from well-known manufacturers, but they are often of inferior quality and may not perform as expected or may even be dangerous. The use of counterfeit electronic components poses a risk to OEMs (Original Equipment Manufacturers), EMS (Electronic Manufacturing Services) and consumers, and it can also have serious consequences for safety and security. This article will provide an overview of the problem of counterfeit electronic components, including their impact and costs for the electronics industry, and the different types of counterfeits used by counterfeiters.

The electronics industry suffers from counterfeit

Counterfeit electronic components have been a growing concern in the electronics industry for many years. The rise of the Internet and globalization has made it easier for counterfeiters to produce and distribute fake electronic components, which can pose serious risks to consumers, original equipment manufacturers (OEMs), and the broader economy.

Also, due to the desynchronisation of the electronic components supply chain between manufacturers and OEMs caused by the unpredictable demand, the market is regularly under tension with recurring shortages. In this case, the only way for OEMs to get their components is to look at the grey market, where counterfeit components are the most widespread.

And counterfeit of electronic components have non negligible impacts on OEMs.

Lower quality and reliability of products

Counterfeit electronic components can lead to a significant decrease in the quality and reliability of products. Not only are counterfeit components often of inferior quality, but because they are not made to the same specifications as the original components, they can also cause unexpected system failures or malfunctions. In addition, counterfeit components may be of such low quality that they cannot be used in certain applications, leading to costly delays and rework.

Increased cost of legal and financial issues

Not only can counterfeit components cause unexpected system failures or malfunctions, but they can also lead to costly product recalls due to replacement and all the logistics processes that have to be implemented.

It can also lead to costly legal proceedings : OEMs may be held liable for any damages resulting from the use of counterfeit components, leading to expensive lawsuits and settlements. Furthermore, counterfeit components can lead to decreased customer satisfaction and increased customer complaints, resulting in a decrease in sales and profits.

Reputational damage due to mistrust

Customers may lose trust and confidence and trust in some products and even brands if their products become faulty due to poor quality and reliability. This mistrust can lead to decreased customer satisfaction and increased customer complaints, resulting in a decrease in sales and profits.

Furthermore, the prevalence of counterfeit components can lead to a decrease in trust in the industry as a whole, resulting in a further decrease in customer confidence.

The Global Market for Counterfeit Electronic components is huge

The problem of counterfeit electronic components is a significant one, and the exact figures can vary depending on the source. However, some estimates suggest that the global market for counterfeit electronic components is worth billions of dollars, and that it is growing rapidly.

According to a study by the Semiconductor Industry Association, the global market for counterfeit semiconductors was valued at $7.5 billion in 2018 and it is expected to reach $10.5 billion by 2022.

According to a study by the US government Accountability Office (GAO), the U.S. Department of Defense (DOD) reported that it found counterfeit electronic parts in its systems in 1,800 incidents between fiscal years 2010 and 2018.

Additionally, the International Chamber of Commerce (ICC) estimates that up to 7% of the global trade in electronic components is counterfeit.

It's important to note that these figures are just estimates and the actual number of counterfeit components and the financial impact of counterfeiting could be even greater. The problem is constantly evolving and it is hard to track it.

Counterfeiters use several techniques to lure OEMs

Fake parts

Fake parts are completely counterfeit components that have been made with inferior materials (or inferior version) and lack the specifications of the genuine part. Fake parts are often of such poor quality that they cannot be used in certain applications. This also implies tampering with application, performance data and testing results.

Most fake components do not have an internal construction (chip, foundry, bondings, etc...) which is mostly undetectable to the eye.

Copying components design

It involves copying the design of a genuine component in order to create a counterfeit part, or what is often called a clone part.

Clone parts are often designed with inferior materials and have been modified in some way to pass quality control tests, but are still not the same quality as genuine parts.

Counterfeit packaging and labeling

This involves creating counterfeit packaging (plastic or ceramic component shell) and imitation labeling that is designed to make the components appear genuine. This can involve creating fake part numbers, altering component markings, or even creating fake test reports or certificates of authenticity in order to reintroduce an old version not requested.

One of the most common counterfeit packaging is black topping. This is a technique used to alter components markings. It involves applying a black coating to the component in order to make it appear genuine. This can be done by simply painting the component, using a black vinyl wrap, or using a black powder coating. This process is necessarily carried out by a counterfeiter outside the manufacturer’s process.

“Black topping” can be detected during a scrape test, realized with a scalpel to scrape on an electronic component face. It’s not destructive on the surface tested because the painting process realized by the manufacturer takes into account this scrape test (is destructive if painting is used to cover the surface).

Selling refurbished parts as new

It involves taking used parts and reworking them to appear as new components. This can involve repairing or replacing components, applying a black coating, or even re-labeling the components with fake part numbers.

Used parts can come from existing PCBs and being repackaged as they were brand new components. External aspects of the components are suspicious with connection bended, not aligned or contaminated by previous solder.

Falsifying component testing results

It involves altering or falsifying the testing results in order to make the components appear genuine. This can involve changing or fabricating the results of tests such as functional tests, environmental tests, or safety tests.

Components batches homogenization

This technique consists of selling batches of brand new components mixed with fake components, clone components or genuine components with different date codes - manufacturing dates (counterfeit in labeling).

It’s quite vicious because sometimes OEMs don’t even know that some of their components were not genuine and performances could be decreased due to older versions hidden in the batch.

How AIRENC helps mitigate counterfeit risks ?

As a peer-to-peer platform, AIRENC allows OEMs, EMS and ODMs to trade electronic components directly. This means that there is no intermediary like brokers involved in the transaction process, reducing the risk of dealing with counterfeit electronic components.

Another element to consider is that each vendor on the platform is assessed before joining our community. The purpose is to ensure that its procurement process meets our quality standards in order to avoid any issue regarding component quality.

And finally, in case of some components would be counterfeit, we ensure full refund for our members.

Avoid counterfeit with AIRENC