Avoid Counterfeit Chips and Semiconductors With a Purchasing Aggregation Solution

By Logan Wamsley

Counterfeit Markets On the Rise

One of the unfortunate side effects of setbacks is that they often cause other setbacks. As they say, when it rains, it pours. One of the strongest examples of this is in the 2022 supply chain crisis, particularly in the global electronic component and semiconductor supply chain.

2021 into 2022 has seen a myriad of conflicts converge upon a single sector. Climate-related events, geopolitical conflicts such as the war in Ukraine, raw material shortages, inflation, infrastructure issues at global ports, and ongoing repercussions of the COVID-19 pandemic have combined to create a supply chain that arguably has never been more uncertain. With such uncertainty comes desperation as companies in various industries are forced to scramble to maintain business continuity however they can, buying as much inventory as they can now under the assumption semiconductors will only be harder to find the longer they wait, straining lead times, prices, and distributors inventory levels even higher than they already were. But if that wasn’t enough, such uncertainty has opened an opportunity for bad actors to monetize the situation through the use of counterfeit components.

Although the term “counterfeit” conjures images of “fake” components, the counterfeit issue is more complex than that. Known colloquially as the “gray market,” there exists outside of authorized distribution channels and entire an entire market of substandard semiconductors and other extremely limited, critical technologies. Outside of the security direct purchasing from authorized distributors provides, these components can be legitimate, but they can equally be previously used and sold as new, defective, or, of course, outright fake.

Some component manufacturers do implement security measures such as counterfeit-proof labeling and barcodes to help sellers make informed purchasing decisions, but these measures are only effective if the buyer is properly educated on them. Most of the time, the buyer has no idea that the component is counterfeit until it breaks in the product itself. If that product happens to be a flight system in a military jet, a transmission in a vehicle, or a life-saving piece of medical equipment just to name a few examples, the consequences could include substantial loss of brand reputation, as well as danger for the operator. Turning to these markets, the buyer must accept not only these risks, but also the 20%, 100%, and in some extreme cases seen in the current environment, over 3,000% markup common in these markets. It is a truly unacceptable situation, but if the alternative is outright halting production as is the case currently in the automotive industry, companies may have no other choice.

What Is Our Purchasing Aggregation Solution?

At Partstat, we created the Purchase Aggregation Solution. The idea is simple: after the customer sends us a list of critical parts they are currently seeing shortages of and how many they need, we then use our Big Data to track over 21 million unique components from thousands of global authorized channel partners in 59 countries. Then, all the customer needs to do is place a single order and Partstat will aggregate all the purchases together.

This has several benefits. First, this ensures complete transparency from the beginning of the purchasing cycle until the very end. The only sellers permitted to participate on the Partstat platform are authorized distributors, guaranteeing inventory authenticity. Every part will be able to be traced back to the manufacturer, entirely avoiding risks posed by the gray market.

The transparency extends to the pricing, as well. By purchasing through Partstat, the customer will avoid price inflation the higher broker markups. All the customer will pay beyond the aggregate part cost is a small, consistent percentage fee at the time of order, and that’s it. No tricks, no hidden fees. And, through extended payment terms, the customer is given a full 90 days to take and pay for the inventory.

The counterfeit market is not only very real but thriving. Companies must take whatever measures they can to avoid it, while still guaranteeing business continuity at least until the supply chain approaches equilibrium, which according to analysts may not occur until 2024 at least. To see if Purchasing Aggregation is right for your company, contact us today!