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Counterfeits: Will the Bad Guy Stand Up?

(05/12/2011)

Counterfeits: Will the Bad Guy Stand Up?

By Dale Lillard, President, Lansdale Semiconductor, Inc., Phoenix, AZ

Released in the May 2011 issue of U.S. Tech

It was reported in a recent 60 Minutes program that the total commerce worldwide in counterfeit products has grown to $600 billion USD. As recently as 2005 it was estimated at $200 billion, so recent efforts to stop it have obviously failed. Counterfeit products are entering every product category — from consumer products such as Prada purses to advanced military electronic components for weapons systems. The more expensive the product category, the more likely someone is making a counterfeit version of it. 

Some of the products enter the normal supply chain and are never even detected by the consumer because the product is such a good counterfeit. Others, like a Prada purse, are so cheap that they are sold outside the normal sales channels, and the so called law-abiding consumer knows it is a counterfeit and buys it anyway, almost smugly, thinking what a good deal they got.  In the case of cheap counterfeit sunglasses that do not have UV protection but still look good, the consumer will take the chance on quality, expecting it to be misrepresented.

But in the case of integrated circuits, the quality of the device is more important; after all it must be able to function correctly in the system. An electronic component can be made to look identical to the real thing, but will not function at all, and the user will not know it until it is installed or worse yet fails prematurely. This can be especially disastrous in a weapons system in battle situations; the component may have barely functioned well enough to pass testing. The Internet has made the sale of counterfeits easy, just as it has the sale of stolen goods. Buyers must act responsibly and buy product through legitimate supply channels to ensure that they do not receive counterfeits.

No More Lowest Bidder

The military procurement system has been improved recently with the QSLD (Qualified Suppliers List of Distributors) Program to ensure the buyers at DSCC (Defense Supply Center Columbus) purchase integrated circuits from legitimate sales channels. All QSLD distributors must pass an audit that demonstrates the authenticity of the source of their products and handling processes — all aimed at preventing counterfeits. They must buy from QSLD distributors and QPL/QML listed manufacturers if listed for 5961 and 5962 semiconductors. There is no longer a rule to buy from the lowest bidder. 
While the government is involved in trying to stop counterfeits, it has failed to slow them down. Senator John McCain (R-Arizona) has proposed a congressional hearing on the counterfeits problem as it is impacting our military programs.
 
The FBI and local authorities are also attempting to enforce American Trademark and Patent laws to protect American industries from all of this rampant fraud. Rarely do you hear of a counterfeit bust. In the electronics industry very few sellers are prosecuted even when they have sold counterfeit product. They defend themselves by saying they did not realize the product was counterfeit, and they get away with it. It is even possible that the product has been returned for credit, except that what has been returned is not the original components, but look-alike counterfeits.
Thus, the legitimate OEM source may unknowingly be shipping counterfeit product that looks like the real thing.

Counterfeits, which are defined by government as “misrepresented product”, are not treated as seriously as stolen product, and yet they really should be. The seller should be prosecuted as is a dealer in stolen goods, and anyone in possession of them should notify authorities and have them confiscated.

One manufacturer has taken a lead. Rockwell International recently issued a notice to its suppliers that if they ship counterfeits to Rockwell, Rockwell will not pay for the product nor return it to them, and the seller’s qualification as a vendor will be reviewed accordingly. All manufacturers should do the same. This type of action is necessary to put the brakes on demand.

”Better” Counterfeits

Counterfeiters are getting better at their trade. It is now becoming more difficult to detect a counterfeit as these bogus peddlers improve their knowledge of the industry standards for packaging and documentation.

In the 2010 DMSMS (Diminishing Materials and Manufacturing Sources) conference in Las Vegas, over 50 percent of the program was dedicated to counterfeits instead of to the “official” topic of diminishing product sources.

The trade booths were dominated by distributors, brokers, and equipment suppliers who displayed their capabilities of identifying counterfeits for potential customers. This venue was of particular interest to them as many users turn to the internet supply chain when a component has been discontinued by the original manufacturer — thus taking the enormous risk that product available this way is counterfeit.

The SAE G19 committee published AS5553 recommending procedures to follow to get authentic parts and controlling counterfeits once they have been identified. Other trade associations like the SIA and JEDEC are studying the problem as it applies to them.

Before Damage Is Done
   
Most counterfeit integrated circuits ultimately are found before the product is installed in a system. Board level and box level testing catch a majority of the package-related counterfeitsbefore they impact a system in the field. However, it does impact readiness as a part may spend years in a warehouse before it is sent to the field for use and then detected. It’s been sitting undetected in somebody’s warehouse all that time.

Replacing such a part with a known good one can take time. So some effort needs to be made to check existing inventories, particularly if they were purchased outside the manufacturer’s normal sales channels. The quantity of counterfeit product will continue to grow as long as there are willing buyers. In the electronics industry, it is imperative to buy product through authorized sales channels to avoid counterfeits.

The government and industry should treat counterfeits like stolen product and prosecute the sellers accordingly.

Lansdale Semiconductor Inc. manufactures integrated circuits that were discontinued by the original manufacturer and licensed by them to continue to support these legacy products. Lansdale was founded in 1964 with the purchase of Philco Ford’s Lansdale Division.

As the “semiconductor aftermarket” pioneer, Lansdale recognized the critical need for a long term manufacturing and supply source within the IC industry and implemented a strategic plan to fill the need by acquiring a series of mature IC product lines from leading OEMs, thereby becoming a leading supplier of semiconductor aftermarket ICs.

Contact: Lansdale Semiconductor, Inc., 5245 S. 39th St.,
Phoenix, AZ 85040-9008  602-438-0123
fax: 602-438-0138 Web: www.lansdale.com 
www.us-tech.com

Counterfeit consumer products generally do not have the potential to be lifethreatening, as do counterfeit electronics used in aerospace, medical and military production.

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phone: (602) 438-0123
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