Counterfeit Chips Are on the Rise, and There’s Only One Solution
While there will always be minor ebbs and flows analyzing any market, long-term the electronic component market will almost assuredly grow to unprecedented levels. Over the next five years, it is anticipated that the market will be valued at nearly $900 billion, driven primarily by exponential demand increases in market such as automotive, healthcare, consumer electronics, and, more recently, AI technologies. With such growth, however, comes several inherent risks — one of the most significant being the rise of counterfeit chips.
“Everything is becoming computerized,” says Roei Ganzarski, CEO of Alitheon in an interview with Fierce Electronics, “whether it’s cars, day-to-day devices or systems being used by the US Department of Defense. And when there’s a high demand that’s not being fully met, there’s more room for outright counterfeit chips, as well as gray market items, which might be a genuine chip that’s packaged as new when it has in fact been used somewhere else for several years.”
And OEMs and their contract manufacturing partners are well of this. For example, according to a recent survey, approximately 87% of industry professionals say that IC counterfeits are and will be a major concern in the coming years. With such a risk looming so large over the industry, innovative new solutions throughout supply chains will be paramount.
What Is Meant by Counterfeit Chips?
When one hears the term “counterfeit”, the first thing that might come to mind is a chip or component manufactured to imitate another. Although this certainly happens and is a concern, counterfeit is now used more broadly, as Ganzarski alluded to. “Gray market” chips refer to chips that may be authentic, but have been used in another application for several years and resold as new — sometimes with a falsified date code. Putting a used and worn chip in, for example, a military defense system poses a grave threat to national security and the health and safety of those around it, because the chip may break at any time and cause malfunction. If the chip is in, say, an airplane’s landing gear, the resulting malfunction could very well prove fatal.
Chip manufacturers, aware of these risks, have in recent years taken steps to mitigate the issue. Hologram stickers, barcodes or QR codes, and other mechanisms have been added to ICs in recent years, but as bad actors learn to overcome them, the relief is short-lived. Even then, often manufacturers are not properly educated on these anti-counterfeit measures and will miss them entirely when researching potential purchases. More recently, some companies have been experimenting with biometrics, which is seen as a more full-proof solution, but mass adoption industry-wide will be slow due to high technology costs.
The Responsibility on the Buyer
Clearly, buyers need to take every precaution to ensure counterfeit or gray market chips do not make it into their builds. However, while anti-counterfeit technologies are improving, the margin of error is still significant enough that another, more permanent solution might be needed.
Partstat offers the only complete solution for avoiding counterfeit markets through our Inventory Ownership Solution. The idea is simple: through our solution, Partstat only purchases components on behalf of the customer through authorized distributors. This way, not only will all chips and components be fully traceable and authenticated, but acquiring them will have no upfront costs for the Partstat customer. Partstat will purchase, store, pack, and ship as needed to the customer, in the process saving the customer warehousing space and up to 47% in annual carrying costs.
For more information on how the Partstat Inventory Ownership can be the counterfeit solution to your supply chain, contact us today!