One-third of the electronic parts sold on the open market might be fake, costing industry billions of dollars per year.
Edited by Kenneth J. Korane
Alliance for Gray Market and Counterfeit Abatement,
Components Technology Institute,
Independent Distributors of Electronics Assn., www.idofea.org
Industrial Fastener Institute,
The Lanham Act, en.wikipedia.org/wiki/Lanham_Act
North Shore Components,
As electronic components have increased in complexity and price, counterfeiting them has become a lucrative business — and a hazard to those buying and using them. From catastrophic failures on military and aerospace systems to the premature demise of PC motherboards, the inadvertent use of counterfeit components jeopardizes product performance, safety, and reliability, and results in costly litigation, product recalls, and loss of customer confidence.
It’s not a trivial problem. Experts believe 30 to 40% of components sold on the open market may be counterfeit or misrepresented. For instance, a 2005 study by the Alliance for Gray Market and Counterfeit Abatement and consulting firm KPMG LLP estimated that the global IT industry loses about $100 billion in revenue to counterfeiters annually. And that doesn’t include indirect effects such as the costs of field service, recalls, and warranty claims as well as the harm to product image and customer satisfaction.
Affected components run the gamut from integrated circuits, transistors, diodes, transformers, fuses, resistors, capacitors, and relays to motor controllers, heaters, dc power supplies, and ac inverters.
This industry-wide problem requires coordinated, industry- wide solutions from original component manufacturers, authorized and independent distributors, brokers, OEMs, and contract equipment manufacturers.
The explosive growth of Asian manufacturing has precipitated the need for increased vigilance because most counterfeit components originate in China, which has a large, thriving, and largely unregulated market for recycled and counterfeit parts. And with its booming manufacturing sector, China has also developed the ideal infrastructure to turn out more-complex and high-value counterfeit components.
Often, counterfeit components are not easily recognized. They might be low-cost parts with remarked or disguised part numbers that match a higher-priced item; older parts salvaged from scrapped PC boards; or defective products discarded by reputable manufacturers and distributors.
Lessons from the fastener industry
Today, counterfeit fasteners are a negligible problem in the U.S.
“Our industry went through a 15-year struggle (1985 to 1999) with the federal government over the proper marking of products and strict adherence to industrial standards,” explains Joe Greenslade, Director of Engineering Technology for the Industrial Fastener Institute, Independence, Ohio. From his perspective, the FQA itself did not cause a major shift in fastener quality. “Instead, it was the grueling process we went through trying to keep the government from overreacting and instituting an over-burdensome law. The resulting Act was reasonable and has been relatively easy to comply with. What got everyone’s attention were the scary proposals put forth by the government along the way.”
When issues have come up since, says Greenslade, fastener industry leaders gather quickly to confer, develop logical solutions, and then widely broadcast the suggestions. And they keep appropriate government representatives in the loop to clearly show the industry is regulating itself.
Any industry facing quality issues (counterfeiting being one aspect) should follow the fastener industry’s lead, advises Greenslade. “Move quickly, do a good job of root cause analysis, educate all concerned parties, and implement rules and regulations to rectify the issue. It is tempting for folks to want to invite the government in to solve the problem. But be careful of what you ask for — you might get it. Any industry and its trade organizations know their business and technologies far better than the government ever will. Try to rectify issues within the industry first and ask for government intervention as a last resort.”
Also, says Greenslade, be aware of the Lanham Act, powerful legislation that makes it illegal to misrepresent any product in any way. One of its best known cases involved a bearing importer selling carbon-steel ball bearings as stainless steel. Customs seized 19 shipments worth more than $1 million.
Anyone can report suspected counterfeits to the Commerce Dept., and several people were prosecuted under this act for selling counterfeit fasteners long before the FQA existed. The Lanham Act is all an industry needs, says Greenslade. “There is no need for specialized laws relative to specific industries to effectively combat the sale of counterfeit products.” — Ken Korane
It is relatively easy to make defective products look good enough to pass visual inspection. Labels are often removed and parts “blacktopped” and rebranded. (Electronic components are typically made with glass-filled plastic and have a textured surface when removed from the mold. Counterfeiters apply a black filler to the original surface and remark the part. From all outward appearances, it’s nearly impossible to spot the bogus surface.)
Counterfeit parts are prevalent in military and aerospace applications, where design engineers often have an incentive to specify mature components which have performed well in the past. If the required item is still widely available through authorized distributors, supply and demand remains in balance — which discourages counterfeiting. But when components reach their end of life and are no longer in production, shortages are more likely, setting the stage for counterfeiting.
Engineers can opt to redesign systems using more readily available products. And although this seems simple and logical, in reality, the decision can be somewhat complicated, as total system redesigns often lead to production delays and added costs associated with obtaining MIL approvals or recertifications. Redesigns can also increase the risk of system failure, especially if replacement parts are new and unproven.
The safest way to avoid counterfeits is to purchase from the original component manufacturer (OCM). However, this is not always possible, including situations where the OCM has ended production, the parts are on allocation from DOD, or delivery times are unacceptable to the customer. This leads to open-market purchases through independent distributors, brokers, and resellers.
Buying products on the open market demands special precautions to lower the risk of putting counterfeit components into electronic assemblies. The best way to ensure reliability and integrity is to get components through reputable distributors who follow stringent quality-control procedures. Your greatest assurance of integrity and traceability comes with products backed by OCM warranties, certificates of conformance, and other traceable documentation. If such documentation is not available, then verify compliance using counterfeit detections tests such as visual inspection and destructive and nondestructive testing.
Because counterfeit components require a willing buyer and seller, there is a shared responsibility to curb these practices. Trade organizations such as the Independent Distributors of Electronics Assn. (IDEA) began to address the problem by establishing standards for independent distributors to follow during incoming inspections. However, as the problem grows increasingly complex and counterfeiters continually refine their skills, more stringent inspections are required, such as those set forth by the Components Technology Institute’s CCAP-101 Certification Program.
The program was developed by Leon Hamiter, who spent 23 years with NASA’s Marshall Space Flight Center, was Chief Engineer of the NASA Standard Components Program, and developed the first high-reliability component requirements for space programs. Mr. Hamiter is currently president of CTI.
CCAP-101 Certification involves a comprehensive review of an independent distributor’s quality systems and establishes inspection and test protocols for detecting and avoiding counterfeits. For example, certification at North Shore Components required on-site audits to review existing quality systems and inspection procedures, followed by employee training and workshops. In the end, CTI recommended stronger internal controls over vendor selection, incoming inspections, documentation, and reporting. To become CCAP-101 certified, we also had to purchase state-of-the-art equipment required for a variety of tests, including RoHS lead-free compliance, solder-ability, decapsulation, test-curve tracer, X-ray, and high-power microscopic inspection.
The cost was considerable but necessary. According to Hamiter, “Counterfeiters have become increasingly sophisticated, and the cat-and-mouse game of counterfeit avoidance has become increasingly complicated, requiring trained eyes and state-of-the-art testing to deter these unlawful and unethical activities.”
CTI CCAP-101 counterfeit avoidance certification program establishes standard due-diligence practices for independent distributors, including:
• Mandatory purchasing practices.
• Documentation inspection.
• Product inspection, sampling, and testing of markings.
• X-ray inspection.
• Decapsulation inspection.
• Electrical testing, including dc, ac, parametric, and product-specific tests.
• Selection and control of outside test labs, when required.
• Counterfeit avoidance inspection reports.
• E-documentation retention.
• Certification reports for customers.
A zero-tolerance policy mandates that incoming lots be considered counterfeit if any sample fails any required inspection. Neither independent distributors nor customers have the authority to change, modify, or delete any authentication practice.
The certification program establishes a series of general requirements and procedural controls, including ISO 9001-certified quality programs. Additional standards include surveillance of products, systems, procedures, and facilities and record retention for a minimum of five years. All personnel must also be trained to properly handle components as well as perform counterfeit-detection procedures, with retesting/retraining required annually or when procedures change, or when personnel demonstrate poor proficiency.
Counterfeiting strikes across the board
Dimensions, colors, shapes, and engravings are much like the original, but critical tolerances and material properties are not up to spec, says Ho er. “Although parts look genuine, the differences show up when they are placed into service. At that point, it is too late.”
For users, bogus parts damage machines and facilities, cause downtime, and risk life and limb — particularly when failure jeopardizes safety, as in vehicular braking systems, Ho er explains. For seal manufacturers, counterfeiting brings warranty costs, damage to brand image, and irate customers, he notes.
To combat the problem, Simrit recently introduced antifraud marking, a process that until now has mainly protected consumer goods and pharmaceuticals. The Secure Adaptive Freudenberg Encryption (SAFE) process marks seals, diaphragms, and other elastomeric components.
The markings clearly identify products with information such as the item model, dimensions, material, date of manufacture, and serial number for traceability and to guard against counterfeiting. The marking can be at and rectangular, or distorted for O-rings and other round parts. And the code remains legible via a vision system and proprietary software even if up to 70% of the marking is damaged or worn o . Conventional machineread codes, such as data-matrix codes, do not have the capacity to identify seal components, says Simrit.
Product marking, therefore, o ers near-foolproof security for manufacturers. SAFE-coding lets them quickly verify legitimate parts on their own and, in the aftermarket, anyone with the encryption system can identify the correct size, material, and part number, says Hoffer.
Counterfeiting is also a signi cant and growing problem for premium-bearing manufacturers, says Randy Bowen, vice president of distributor relations for SKF, Norristown, Pa.
“Typically, somebody in Asia takes a cheap, local bearing, removes the markings, and adds the SKF brand. They then put it in a package that closely resembles ours and attempt to pass it o as an SKF authentic bearing,” explains Bowen.
Unfortunately, they do a pretty good job of it. “The vast majority of times, there are no tell-tale signs on the package or bearing — it’s too good for the average person to tell. End users might not be highly suspicious because the price is similar to that of a genuine bearing. And many users don’t inspect parts prior to installation, which plays into the hands of counterfeiters,” explains Bowen. “Users only spot problems when the bearings don’t fit or fail after a few hours.”
Few types of bearings seem to be immune. SKF has found imposters in large ball bearings for wind turbines and large spherical-roller bearings for paper mills. But it has also come across counterfeits in small ball bearings and other products that sell for less than $10.
No region seems to be spared, either. “While a lot of fraudulent product originates in Asia, we’re seeing problems most everywhere. There was recently a raid and seizure in the Czech Republic, and we’ve had similar instances in Alaska, California, and Arizona,” Bowen notes. And this June, Joseph Ungar of Brooklyn pleaded guilty to selling inferior-quality counterfeits to New York’s Metropolitan Transportation Authority, and will pay more than $330,000 in fines and restitution.
The costs of premature failures due to inferior products usually far exceeds the price of a bearing, Bowen emphasizes. He cites repairs on wind turbines as one example. Downtime alone is costly. And in addition to routine parts and labor, there’s the expense of renting a highpriced crane to lower the gearbox to the ground and reinstall it when repairs are complete. “Should it fail shortly after it’s up and running again, that’s an expensive proposition,” he says.
OEMs that buy direct from bearing manufacturers eliminate the problem. When that’s not possible, says Bowen, purchase from authorized distributors. They’ have access to proprietary, anticounterfeit markings SKF adds to packaging that helps ensure users get genuine parts.
For the future, SKF is investigating techniques such as adding holograms to packaging and imbedding “intelligence” into packages and bearings to identify genuine parts. “Until that becomes cost effective, we continue to stress that customers should buy only from authorized distributors,” says Bowen. — Ken Korane
Formal, documented procedures are also required for selecting and approving suppliers. They are reviewed based on past business practices, liability insurance, financial stability, control over suppliers, counterfeit avoidance, proper handling to prevent electrostatic discharge, and other controls. Approved suppliers must provide:
• New, never installed components.
• Original OCM markings with no signs of changes, alterations, or additions.
• A 30-day authentication period.
• Traceability to all previous suppliers, when available.
Suppliers must also agree that they will not be paid when components are identified as counterfeit. These parts are not returned and are legally disposed of. In addition, military and aerospace-spec components cannot be sourced from China, India, Africa, or other areas known to supply counterfeit military components.
Every incoming shipment is inspected on a 100% or sampling basis, as defined by CCAP-101, to verify proper dimensions and OCM markings; check the condition of leads, terminals, plating and coplanarity; look for evidence of altered markings, remarking, additional markings, blacktopping, or previous installation; changes or alterations to the physical package or leads, including reballed BGAs (ball-grid arrays); and confirming bar codes match component labels and marks.
Commercial and military components must be verified to OCM specification and data sheets for all observable characteristics, with nonconforming characteristics listed in the inspection reports that contain digital photography and graphics showing counterfeit aspects. Inspections verify part numbers, confirm the manufacturer, check date and lot codes, check physical characteristics (number of leads, dimensions, and pin identifier) to data sheet or MIL spec, and require microscopic inspection of component markings, body, and leads.
Here are some of the most-significant tests qualified distributors must perform.
Marking permanence and blacktopping tests are performed according to JES22-B107C marking permanency or MIL-STD-833, method 2015, resistance to solvents. Acetone tests check for solvent-soluble, nonepoxy blacktopping that covers sanding marks and previous markings. Blacktopping tests can be augmented by lightly scratching the component surface to see if a clear coating has been applied to restore surface smoothness and conceal sanding striations. Peeling or flaking material indicates possible remarking with coatings not suitable for acetone.
X-ray inspection of samples prior to decapping determines if the package contains a die (and the die size), consistent headers, and if the die has wire bonds. X-ray inspection also determines the exact die location to avoid cutting internal wires when opening the component.
Decapsulation removes the package to allow inspection of the internal die for authenticity. It lets inspectors photograph the entire die, its markings, and manufacturer logo using a metallurgical microscope. Plastic-encapsulated semiconductors can be decapsulated chemically or mechanically and examined for correct die marking, ink dots that indicate an OCM reject part, and the condition of bonding wires. It also reveals signs of electrical overstress such as fused metal, ruptured oxide, and excessive heat or corrosion due to moisture or contamination.
Microscopic inspection distinguishes normal OCM package variations from those typical of counterfeits. Low power (3× to 30×) and high power (30× to 400×) microscopes inspect outer surfaces and verify die markings after decapsulation, with digital cameras providing archived images.
Electrical testing determines if parts are OCM authentic, but it does not ensure they are new and not refurbished. Experienced test houses typically perform complex electrical inspections, usually for an additional fee.
Parametric and functional testing can determine whether components are grossly defective or not authentic. Functional testing measures a component’s electrical performance against data sheet parameters. Test results verify key parameters, including minimum and maximum limits, and component response for each test. Such tests absolutely verify that components are authentic and fully operational.
In the end, component users must work with distributors to fight counterfeiting. This might mean giving distributors adequate time to verify authenticity, and adding more time into their own schedules with less emphasis on JIT. And companies should have more-realistic price expectations, not merely sourcing from the lowest-cost supplier.