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Counterfeit Parts Still Flood the Supply Chain
By Rob Spiegel -- Electronic News, 1/18/2005
You’re in a booth at an electronic components show in China. A professionally dressed woman comes up to you with a loose-leaf book and shows you pages full of labels from brand-name component manufacturers. She tells you her company can make very inexpensive battery packs and you get to choose the label the packs will carry.
This actually happened to Kevin Parmenter, technology director of worldwide EDMS sales at the South Portland, Maine-based Fairchild Semiconductor. The maddening part of the story for Parmenter is that Fairchild itself is frequent victim of component counterfeiting.
How does Parmenter know? Two ways. Sometimes customers return excess inventory, and though the components carry a Fairchild label, it’s not a component Fairchild makes. Or Fairchild will receive a complaint about a component’s quality only to find the component wasn’t made by Fairchild. “The customer gets a failure and they send it back to us, but it’s not our part,” Parmenter said. “We’ve taken these counterfeit parts apart and it can’t possibly work at the power levels it needs to work at.”
Parmenter believes the counterfeit problem is global, though it is most prevalent in China. “These parts are coming from all over the world, but I’d say 90 percent of it is from China -- and it’s growing,” Parmenter said.
As for that growth, Parmenter estimates the market for counterfeit parts has passed the billion-dollar mark. “The counterfeit market is the size of Fairchild. Imagine if we were allowed to stay in business shipping just counterfeit parts,” he remarked.
Over at Avnet Inc. in Phoenix, the distributor is seeing a slew of counterfeit parts, even in the military market. Detecting it can be difficult because of the way the military uses parts. Components can sit on shelves for months or years. “The parts are shipped directly to depots and put on a shelf and not opened until needed -- such as during a war situation,” said Jim Ferry, director of Avnet’s Electro-Air, the unit that sells avionics components to the aircraft industry. “The military components come wrapped in paper, so you can’t take apart the packaging and inspect it all.”
The counterfeit parts in the military market are often not discovered to be faulty until the part is needed in the field. Ferry points to a case in Florida where two men were charged with supplying junk since 1995. “Their bid was the lowest contract for hundreds of products,” he said. “The parts were put on shelves and when they were opened they didn’t work or were not the right quality -- the connectors were melting in the field.”
Ferry further notes that counterfeit parts are currently causing difficulties in Iraq. “Sometimes the air conditioners are not working in the tent cities.” Asked what triggers his suspicion about counterfeiting, Ferry points to times when Avnet gets outbid by unknown companies. “We question it when we lose business to people we’ve never heard of. That’s counterfeit,” Ferry said.
According to Fairchild’s Parmenter, the counterfeit problem will continue growing as long as it’s profitable. “It’s like the drug problem. As long as you have people willing to buy it, and the profit margin is there, there will be people willing to sell it,” he said.
As for government help from China, Parmenter doesn’t believe that recent crackdowns on component pirating will have much effect. “I believe China is trying to curb counterfeiting, but the country is wired to copy things,” said Parmenter. “For years the Europeans have been going over there saying we want you to make this product cheaper. So they copy it. It’s hard for them to sort out culturally that sometimes it’s ok to copy and sometimes it's not.”
