Counterfeit Chronicles: Episode 2 – The 2023 Counterfeit Activity Report

Feb. 26, 2024
This episode of Counterfeit Chronicles highlights the 2023 counterfeit activity across the electronics industry that was gathered and reported through ERAI. The numbers display a shifting landscape of counterfeit actions and parts across a global web of interconnectedness that will require diligence to actively combat the problem.

This episode of Counterfeit Chronicles highlights the 2023 counterfeit activity across the electronics industry that was gathered and reported through ERAI. The numbers display a shifting landscape of counterfeit actions and parts across a global web of interconnectedness that will require diligence to actively combat the problem.

This interview was edited and formatted for clarity.

Tyler Fussner, Managing Editor, Supply Chain Connect

Hello and welcome to Counterfeit Chronicles, the newest series at Innovation Destination. As always, I’m your host, Tyler Fusner, Managing Editor at Supply Chain Connect, and joining me again today is Richard Smith, Vice President of Business Development at ERAI. Hey, Richard.

Richard Smith, VP Business Development, ERAI

Tyler, how are you? Thanks for having me back. I really appreciate it.

Fussner 0:34

Well, glad you could join us again. I am very excited for our conversation today, which will be an all-encompassing recap of counterfeit activity tracked, logged and reported by ERAI. Let’s dive into it. First question for you, Richard: How many reported counterfeit parts did you guys see for 2023?

Smith 0:54

In 2023, ERAI published 786 counterfeit and non-conforming part reports. That’s very similar to 2022’s number of 768, and we can talk about that to put this in context, in the time that we have been tracking this annual number, 2009 was the lowest number of 295 reported counterfeit parts and 2011 was the highest number at 1,282.

Fussner 1:28

Okay, so we’re seeing a little bit of a decrease in overall counterfeit part quantities. 2023: Do you think that was an aggressive year for counterfeiting (in line with last year, seems not too far off)?

Smith 1:41

It’s kind of in line, and most of these numbers fall between the high and the low that I mentioned. What I want to stress is the parts that make up those annual totals, that is the ‘moving target,’ and we never really know—and we can’t predict—what that’s going to be. To demonstrate that, I always say that from the year 2000 through the end of 2018, every single year, the number one most counterfeited device was some integrated circuit or another. In 2019, for the very first time, the number one most counterfeited device was a multi-level ceramic chip capacitor. As we get into a little more of these number crunches, we’ll look at some of the brands and part types that have been reported as counterfeit.

I didn’t mention earlier, this numbers crunch, we do annually, Tyler. It’s generally well received. I do this on a road show all the time at various conventions and symposiums and talks that I do. People involved in the industry generally appreciate and enjoy and like to look at the annual numbers crunch.

Fussner 2:56

You mentioned in 2019 we had a shift in the leading part type. I was curious what were the leading types of counterfeit parts for 2023?

Smith 3:04

In 2023, out of the 786 published parts, analog ICs were the number one part type. Specifically, that that was 18% or 142 parts. Number two was microprocessors; 128 parts. Then memory devices; 102 parts. Programmable logic; 103 parts. And then other ICs; 12.4% or 97 parts. Below that, it all drops to under 10%. Diodes, for instance, with 3.6% of the reported totals.

These top parts that I mentioned—What makes them the top reported counterfeit devices? Well, there are several things that go into making a part counterfeit, or for counterfeiters to make a part. Number one is demand. There is a lot of demand for analog circuits, microprocessors or memory. These are typically higher ASP, or average selling price, devices. That drives the likelihood of a part being counterfeited, as well as available material to make the counterfeited devices. Unfortunately, there is still too much of that available in the form of e-waste that the U.S. and Europe scraps—tens of thousands of tons of e-waste every year. It ends up in some place in Asia where the parts are harvested and remarked, cleaned up, and then sold back to us as something other than what they are.

Fussner 4:49

Richard, I’m curious, of the reported counterfeit parts and devices was there a measurable difference across parts status say, obsolete versus active?

Smith 5:00

Good question. When I do my pitches and show people our database and search tools, I often will have a customer say, “We have no need for this because we don’t buy obsolete products.” That is not always a driver of counterfeiting.

In 2023, 45.7% or 359 of the parts that were reported as counterfeit were obsolete.

In contrast, we tracked ‘active’ a couple of different ways. 32% of our parts are Active-Long Lead Time, meaning they’re still available from the factories and distributors, but because of demand it would be an over 90-day lead time. During times of shortages, it’s not unusual to see active parts with lead times of six to nine months, and in extreme cases active parts with lead times of 12 months and beyond. Two or three years ago, in the automotive industry, electronics were running with that kind of lead time.

We also tracked Active-Available, and that is 13.2%. That would mean that these parts are active, but they are currently available from the factories or their franchise-authorized supply chain.

Active-Unknown makes for a small amount.

The total is 378 of the parts reported were Active devices.

In contrast, and again, this is the ‘moving target’ thing, in 2022, only 28% of the parts reported as counterfeit were obsolete and a full 62% were Active-Available parts that were still being counterfeited.

Fussner 6:52

And over the years, have you seen a pattern in the shift of more counterfeit obsolete parts or more counterfeit active parts? Or is it, like you said, a moving target, and you just have to be prepared for what’s happening today?

Smith 7:07

Unfortunately, it is a moving target. You have to use all the possible best practices and standards at your disposal to fight this. I’ve worked with several companies over the years, and recently a couple more, and they’re trying to come up with ways to predict what’s going to be counterfeited next and it’s virtually impossible. There are just too many variables to predict accurately what is going to be counterfeited in the future.

Looking back, historically, at least it shows us where the weaknesses are and allows us to attack those areas and tighten down our procedures and our vendors. You just never know when something like these multi-level ceramic chip capacitors is going to come and infiltrate the market with something new.

Along these lines, I will mention that out of the 786 parts that we published in 2023, 75% of them were reported as counterfeit for the very first time. This again plays into my comment that I always make that it’s a moving target. Companies could have worked with their vendors and their process and done everything they possibly could to tighten down all the known counterfeit channels and avoid that product, but no matter what they did in 2022, in 2023 of all the parts reported 75% of them were for the very first time. No one knew that those parts had been counterfeited or were going to be counterfeited. That’s the area that we need to focus on as we go forward in the industry.

Fussner 8:58

And so, for those first-time instances, I’m sure, like you said, you can be prepared, but you never know where these counterfeit parts are going to be coming from. But looking back at 2023, what were some of the brands that were among the most reported for counterfeit parts?

Smith 9:14

There is a standard top five or six that all rotate those top spots. Specifically in 2023, Texas Instruments was the number one most reported counterfeited brand. Second was Xilinx. Then Analog Devices. Then STMicroelectronics. Altera. Microchip. And then Infineon, one of the European-based integrated circuit suppliers.

If we look at these brands, they have something in common. There’s a great deal of demand. They’re typically higher ASP, or average selling prices. And unfortunately, there’s an awful lot of raw material available for the counterfeiters to use, and that’s just a function of them being such big, popular brands with such an installed base of products and so many customers over such a long period of time.

Fussner 10:21

Were there any geographic locations that supplied more counterfeit parts than others last year?

Smith 10:27

In 2023, the known suppliers of counterfeited parts breakdown like this… And what I mean is this is the location of the companies that were reported for shipping a counterfeit device. A customer says, “I got this counterfeit part, and this is the guy I bought it from.” What I don’t always know is who that reported company bought their parts from. When we get an incident report, we dig as far back in the supply chain as we can.

The way it broke out in 2023, 32% of all the reported companies, the bad guys, were in the United States; 47% were in Asia. When we talk about Asia, we break it down. China: 27%. South Korea: 7.4%. Singapore: 4.9%. Japan: 3.4%. India: 1.5%.

Much of the product that’s reported as counterfeit from a U.S. supplier, some of that may or may not have been counterfeited in the U.S. More often than not, that company, or those companies, purchased the product from one of the known Asian counterfeiters.

It is not limited to just those; it spans some European countries as well. Some of the smaller percentages come from Canada, Germany, Spain, Israel. The point is counterfeit electronics is a global problem. The good guys operate globally and the bad guys, unfortunately, are operating globally as well.

Fussner 12:16

Richard, when you finally got a chance to look through all this data that your organization has gathered for 2023, was there anything that caught you by surprise? When you’re looking at all the counterfeit activity of last year, where there maybe new counterfeit parts that users should be on the lookout for? Did you see anything positive—a reduction in counterfeit activity for some of the more familiar parts? I guess my question is, what were some of the highlights that really stood out to you?

Smith 12:43

Something that really stood out to me was that 75% number of being reported for the first time. That is one of the big topics that I focus on—the moving target aspect of it.

I still maintain that the problem could and would be much worse if people have not tightened down and adhered to the various standards that affect the industry now and put policies and programs in place to identify and segregate this counterfeit material from their supply chain.

We have to be diligent in maintaining all the best practices and it requires a continual effort of vetting vendors.

One of the important uses of our database is a company could be reported for having shipped a counterfeit part last week, and there could be companies out there that have been using that supplier for years. Maybe they haven’t experienced any problems. But unless they’re paying attention to the database and see that this company was recently reported, it doesn’t matter how long they’ve been an approved vendor with another customer, ultimately that means a potential problem and you could be the next victim of a counterfeit part.

We have to continually vet our current and new vendors, our current products, always looking at our bill of materials. There are tools available like the ERAI bomb scrubber where you can scrub your bill of materials against our database and generate a list of everything that you’re currently buying and using that’s known to have been counterfeit. That result and that list changes on pretty much a daily basis. It is very rare that a day goes by that we aren’t adding reported counterfeit parts to our database.

Diligence and continued effort are required to battle the problem.

Fussner 14:50

And Richard, if any of our listeners are interested, how could our audience get access to this information?

Smith 14:57

The report that I’m talking about is available in a PowerPoint, and that will be posted on our website in the coming weeks. Anyone could go to now and see the 2022 numbers crunch available (it’s down in the bottom-left of the web page). Sometime this quarter, typically the first quarter of the year, the 2023 numbers crunch will be added to the website and that information will be available.

Fussner 15:26

Excellent. Well, I am certainly looking forward to it and I know most of our listeners are as well.

Richard, I want to thank you again for joining us as always. Looking forward to our next conversation.

Smith 15:37

Tyler, I am as well. I’m really starting to get a kick out of this. I enjoy sharing the numbers and telling the story.

We’re true believers here at ERAI and we want people to get the best available products out there and we’re just trying to provide a way to avoid the bad parts and the bad guys.

I look forward to talking with you again; until I do, stay safe, stay well.

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About the Author

Tyler Fussner | Managing Editor - Community Manager | Supply Chain Connect

Tyler Fussner is Managing Editor - Community Manager at Supply Chain Connect, part of the Design & Engineering Group at Endeavor Business Media.

Previously, Fussner served as the Associate Editor for Fleet Maintenance magazine. As part of Endeavor's Commercial Vehicle Group, his work has been published in FleetOwner magazine, as well as Bulk TransporterRefrigerated Transporter, and Trailer-Body Builders.

Fussner's May 2022 print feature 'The dawn of hydrogen trucks' was named the best single technology article in B2B by the judges of the 2022 Folio: Eddie and Ozzie Awards. Fussner was also awarded Silver in the Technical Article category for the Trade Association Business Publications International (TABPI) 2021 Tabbie Awards.

Fussner previously served as Assistant Editor for Endeavor's Transportation Group on the PTEN, Professional Distributor, and brands.

Fussner studied professional writing and publishing at the University of Wisconsin-Whitewater. He has experience in shop operations, is a Michelin Certified Tire Technician, and a Michelin Certified Tire Salesperson.