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Counterfeit Chips Proliferate Amid Shortages

June 21, 2021
With no immediate end in sight to the semiconductor chip shortage, more counterfeiters are looking to cash in on “panic buying” by bringing their substandard, unsafe chips to market.

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The ongoing semiconductor chip shortage is fueling a counterfeit chip wave as companies struggle to get the raw materials they need to be able to make their products. Never ones to shy away from an opportunity to cash in on someone else’s challenges, counterfeit chip makers have stepped up their activities in hopes of grabbing their piece of the pie. Knowing this, procurement teams should be on even higher alert than usual when it comes to chip-sourcing.

“The worldwide shortages have opened the door for criminals to exploit the electronic component marketplace,” the Independent Distributors of Electronics Association’s Steve Calabria told Ars Technica. ”Companies that have never been rated by any other company in the industry [are] showing significant quantities of parts that are in shortage.”

“From face masks to hand sanitizer and onto vaccine passports,” ZDNet points out, “almost all of the products that have been in high demand during the past few months have inevitably provided an opportunity for fraudsters looking to make easy money from counterfeits.” And, a market flooded with semiconductors that “just about” pass for authentic, it adds, but that in reality are illegal products that could pose major safety risks.

The Real Deal or Fake Chips?

Where counterfeit iPhones and Kindles have been available on e-commerce sites like Alibaba and AliExpress for years, Ars Technica says counterfeit chip makers use different marketing tactics. For example, they may approach production lines that are currently in danger of shutting down.

And where counterfeit consumer electronics are often visibly or operational different from the “real deal,” faking chips used to make those devices may be a much simpler proposition, “with few if any obvious visible indicators that something is not quite right,” Ars Technica points out.

“A counterfeit chip might be a knock-off designed inexpensively from scratch as a drop-in replacement, or it might be a genuine-but-scavenged part, desoldered from the board it was found on, cleaned up, and pressed back into service as new,” it continues. “Either way, such chips can frequently work well enough to pass muster at first but fail earlier than genuine parts—or under a specific load or in a specific environment that the original would have passed.”

Trying to Keep Up

With the world’s foundries unable to produce chips fast enough to cope with the current surge in demand, the global chip shortage is impacting all industries that depend on electronic components, ranging from basic home appliances like microwaves and refrigerators to the automotive sector. These and other factors are opening up a golden opportunity for electronic component counterfeiters and fraudsters to step in,” ZDNet states.

"If next week, you need to get 5,000 parts or your line will shut down, you will be in a situation of distress purchase and you will put your guard down," Diganta Das, a researcher with the Center for Advanced Life Cycle Engineering, told ZDNet. "You won't keep to your rules of verifying the vendor or going through test processes. This is likely to become a big problem."

Quelling the Panic

Counterfeiting can occur when original equipment manufacturers (OEMs) turn to unreliable suppliers or vendors in times of panic. “Once fake chips are created, it’s difficult to track them in the supply chain,” Jack Trompert writes in “Emerging Semiconductor Supply Chain Challenges in 2021.” “With pressure to meet deadlines and customer demand for quality products, semiconductor leaders can’t afford to inspect each device without risking delays and cost.”

There are several ways to combat fake chips. Some manufacturers use yield management software to collect and analyze the test data for each node of the operation, Trompert offers. Other companies rely on computer vision cameras and blockchain technology to trace and identify fakes.

Unfortunately, what’s happening now could be just the start of a wave of counterfeit semiconductors coming into the market. “I think we are on the cusp of a major problem here,” Calabria told ZDNet. “The worldwide shortages have opened the door for criminals to exploit the electronic component marketplace, and I’m seeing early signs this has already started to happen.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.