Counterfeit-part risk expected to rise as semiconductor market shifts into higher gear, says IHS
May 10, 2012 // Julien Happich
With the semiconductor industry entering a phase of accelerating growth, the number of counterfeit-part incidents also is expected to rise to new record highs, according to an analysis of trends conducted by information and analytics provider IHS.
The number of counterfeit parts reported in the electronics supply chain historically has risen and fallen generally in concert with the annual performance of the global semiconductor industry, as presented in the figure below. Chip sales and component counterfeits expanded in tandem during the period from 2001 to 2007—a time of expansion for the semiconductor industry. Counterfeits then plunged when semiconductor revenue contracted in 2008 and 2009 as the global economy went into recession. However, when semiconductor industry revenue rebounded by a hefty 33 percent in 2010, reports showed that counterfeit reports surged by a whopping 152 percent.
This year the semiconductor industry is entering a new expansion cycle, with revenue growth accelerating to 4.3 percent, up from 1 percent in 2011. Growth is expected to rise to 9.3 percent in 2013. With supply chain participants in 2011 reporting 1,363 separate counterfeit-part incidents worldwide—a record level—conditions now are prime for counterfeit reports to reach new highs in 2012.
“The semiconductor industry is exhibiting the classic signs of the start of a new growth cycle, with tightening supplies, broad-based price increases and a lengthening of lead times for the delivery of products,” said Rick Pierson, principal analyst for semiconductors at IHS. “These are prime conditions for suppliers of counterfeit parts, which are eager to fill supply gaps with their fake goods. For semiconductor purchasers, the rise in counterfeits represents a major risk, bringing downsides in terms of financial losses, damage to company reputations and even safety concerns in some products.”
Prime breeding ground for counterfeits
Most electronic components appear to be experiencing a tightening of supply along with an increase in pricing and lead times. Price increases are expected to continue rising throughout 2012.
IHS now predicts that demand will exceed supply in the third and fourth quarters for many widely used components, including capacitors, NAND flash, dynamic random access memory (DRAM), power semiconductors and logic chips.
Such shortages represent a prime environment for counterfeiters to thrive. “Counterfeiters have gotten more sophisticated,” Pierson noted. “They watch the market and know where the weaknesses are. They know which products are in short supply and can generate profits. And they also know when market conditions are shifting in their favor.”
For example, counterfeits surged in the wake of the Japan disaster when concerns regarding supply shortages prompted panic buying of semiconductors and other components.
To defend themselves against the counterfeit scourge, electronics buyers must arm themselves with knowledge.
“It's critical to discuss the counterfeit issue, to understand the reasons why incidents of fake parts are on the rise and to identify the markets where these phony parts are appearing,” Pierson observed. “This is because the counterfeiters are certainly analyzing the electronics market, probing for weak points and seeking opportunities to exploit opportunities as they arise.”
Supply chain pitfalls
Amid the strain of keeping production lines running, the issue of counterfeit parts is sometimes neglected. However, companies that fail to pay attention to the issue face a range of risks. A 2009 survey conducted by IHS showed that electronics buyers have an array of concerns.
For buyers in the defense and aerospace industries, concerns include failures in aircraft safety and compromises to systems that are critical to national security. For players in commercial markets, issues range from damage to company image, to erosion in customer trust, to loss in revenue, to increased delivery time, to rising risk of legal action arising from product failure.
The task of avoiding the pitfalls of counterfeits is not always straightforward.
“To reduce counterfeit incidents, electronics buyers strive to restrict their purchasing activities to their customary supply chains, sourcing parts directly from their suppliers or from franchised distributors,” Pierson said. “However, the mandate for electronics makers is to keep their production lines running at all costs. And sometimes to do that—especially during a time of rising demand and short component supplies—they go outside of the supply chain to obtain parts.” Even franchised distributors sometimes buy excess inventory from other companies that could introduce counterfeit parts to the supply chain, Pierson noted.
Forewarned is forearmed
To mitigate the counterfeit problem, electronics buyers must develop a plan to ensure continuity of supply. Such plans, similar to companies’ contingency preparations for disasters, require firms to update their listing of suppliers, parts/materials, life cycles, logistics and internal operations. For every supplier, buyers must create and update the supply profile of that entity.
Doing this is more important in times when counterfeit activity is on the rise. It’s also critical to identify which parts and markets are more susceptible to counterfeit activity.
Visit IHS at www.ihs.comAll news
Smartphone-based patient monitoring is set to impact medical equipment OEMs
June 17, 2013
Patient monitoring and diagnosis equipment is being transformed, undergoing a profound change that will severely disrupt ...
Excelsys with IMCA Electronics for distribution in Turkey
Smartphone demand makes Spreadtrum guidance soar
Teseq EMC test facility expands field probe calibration service
Revised IEEE 1149.1 'JTAG' standard should reduce IC design costs through test re-use
Will graphene supercapacitors be the best?
June 17, 2013
Black magic has a new meaning. It is the sub-optimal way most supercapacitors rely on soot from burnt coconut shells and ...
Saft wins multi-million dollar contract for Li-ion batteries to power SES-9 satellite
Imec and Renesas Electronics reveal world's first multi-standard RF receiver in 28nm CMOS
Field test of IPv6 wireless mesh communication at Norway's Smart Grid centre
InterviewSilica moves to fast lane in Europe's LED market
In the booming market for LED lighting, electronics distributor Silica intends to lead the pack by offering technological excellence at application level. The company is currently planning to offer tailor-made ...
Filter WizardCheck out the Filter Wizard Series of articles by Filter Guru Kendall Castor-Perry which provide invaluable practical Analog Design guidelines.
Linear video channel
READER OFFERRead more
The SoCKIT evaluation kit is Arrow's latest development tool, featuring an Altera Cyclone V SoC with a dual-core ARM Cortex-A9 MPCore processor integrated within its 28nm FPGA fabric.
Altera SoCs allow embedded system developers to differentiate their end product with customized hardware and software, and extend the product lifecycle through hardware and software updates in the field. This month, Arrow Electronics is giving away five SoCKIT evaluation kits featuring Altera’s ARM-Based SoCs, worth €249 each, together with the free entrance to one of Arrow’s SoC workshops organized throughout Europe.
And the winners are...
In our previous reader offer, Freescale Semiconductor was giving away five IMX6Q, Sabre-lite kits, worth £128.06 each.
Lucky winners include Mr. X. Salada Sole from the UK, Mrs A. Peric from Germany, Mr Z. Janosy from Hungary, Mr D. Gacina from Croatia and Mr B. Boris from France. All should be receiving their packages soon. Let's wish them some interesting findings with their projects.
December 15, 2011 | Texas instruments | 222901974
Unique Ser/Des technology supports encrypted video and audio content with full duplex bi-directional control channel over a single wire interface.